You plan to retire in exactly 20 years. Your goal is to

open a fund that will allow you to receive $20,000 at the end of each year for the

30 years between retirement and death (a psychic told you would die exactly 30

years after you retire). You know that you will be able to earn 11% per year during

the 30-year retirement period.

a. How large a fund will you need when you retire in 20 years to provide the

30-year, $20,000 retirement annuity?

b. How much will you need today as a single amount to provide the fund calculated

in part a if you earn only 9% per year during the 20 years preceding retirement?

c. What effect would an increase in the rate you can earn both during and prior to

retirement have on the values found in parts a and b? Explain.

d. Now assume that you will earn 10% from now through the end of your retirement.

You want to make 20 end-of-year deposits into your retirement account

that will fund the 30-year stream of $20,000 annual annuity payments. How

large your annual deposits have to be?