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6. You are planning to retire in forty years. You will be spending $25,000 per year, starting at the end of year 41. Assume you will live for 25 years after retirement and the annual interest rate is 5%. (a) What is the present value of your total spending

Respuesta :

Answer:

$352357 (Approx)

Step-by-step explanation:

Given:

Payment per year = $25,000

rate of interest = 5% = 0.05

Number of Payment = 25  

Present value = ?

Computation:

[tex]Present Value = PMT [\frac{1-(1+i)^{-n}}{i}] \\= 25000 [\frac{1-(1+0.05)^{-25}}{0.05}]\\ = 25000[\frac{1-(1.05)^{-25}}{0.05}]\\=25000[\frac{1-0.2953}{0.05} ]\\=25000[\frac{0.70471418}{0.05} ]\\=25000[14.0942837]\\=352,357.093[/tex]

Therefore , present value is $352357 (Approx)