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Convention for the pre-retirement annuity

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A potential client asks you how much he would need to invest today (lump sum) to assure a $35,000 annual supplemental 15-year annuity upon retirement in 20 years. The annuity payment would begin at the end of his first year of retirement. Assume an annual investment yield of 8 percent.

Rather than investing a lump sum, what would be the annual pre-retirement annuity to obtain the same objective? Again, assume end-of-year convention for the pre-retirement annuity (annuity paid at the end of the year) and an annual investment yield of 8 percent.

Reference no: EM131950939

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