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Determine the size of the annual deposits that must be made

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Mr. Kam is now considering his future development planning and seeks your advice as below:

Question (a) Mr. Kam is 25 years old today and is planning for his retirement. He wants to set aside an equal amount at the end of each of the next 35 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to withdraw $35,000 per year from the account on his 61st through 80th birthdays. The account is expected to earn 7 percent per annum for the entire period.

Determine the size of the annual deposits that must be made by Mr. Kam.

Question (b) Mr. Kam's daughter Janice would like to send her parents on a cruise for their 25th wedding anniversary. She has priced the cruise at $15,000, and she has 5 years to accumulate this money. How much must Janice deposit annually in an account paying 10 percent interest to have money to send her parents on the cruise?

Reference no: EM132596990

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