posted by Mani .
Meg's pension plan is an annuity with a guaranteed return of 9% interest per year (compounded semi-annually). She would like to retire with a pension of $70000 per semi-annum for 25 years. If she works 45 years before retiring, how much money must she and her employer deposit per semi-annum? (
Assume the 9% per annum interest stays fixed for the 70 years of Meg's life.
D=semi-annual deposit (in first 45 years)
m=number of periods while working = 2*45=90
W=semi-annual withdrawal (in last n=25 years)
n=number of periods while retired = 2*25=50
A=amount accumulated on Meg's retirement
R=semi-annual interest rate = 1.045
Capital required on Meg's retirement,
First calculate A,
To accumulate A over 45 years: