Posted by **matt** on Wednesday, June 10, 2009 at 11:26am.

Mr. Jones intends to retire in 20 years at the age of 65. As yet he has not provided for retirement income, and he wants to set up a periodic savings plan to do this. If he makes equal annual payments into a savings account that pays 4 percent interest per year, how large must his payments be to ensure that after retirement he will be able to draw $30.000 per year from this account until he is 80?

This problem must be broken into two parts to solve. First, the present value of the

retirement annuity must be calculated.

PV =

=

=

Now we need to calculate the annual savings required that will grow to this retirement

amount using the future value of an annuity table.

$333,540 =

=

$11,200 =

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