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Your friend decides that he needs to receive a retirement payment of 70,000 dollars per year from a retirement fund that is projected to earn 8.5% per year. He is planning on a 20 year retirement. How much money does he need to have on hand when he retires, in order to fund this? Group of answer choices

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Answer:

Explanation:

This is an Ordinary Annuity question. You can solve this using a financial calculator. I'm using (TI BA II Plus)

N; duration = 20

I/Y ; interest rate per year = 8.5%

PMT ; recurring annual payment = 70,000

FV; Future value = 0 (In solving annuities, use 0 if not given)

then CPT PV = ?

PV = 662,433.563

Therefore, your friend needs to have $662,433.56