How much does Jerry need to contribute each year

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Problem - Jerry and Donald are two brothers with the same birthday. Today is Jerry's 30* birthday and Donald's 25 birthday. Donald has been saving for retirement ever since his 20" birthday, when he started his retirement account with a $10,000 contribution. Every year since, Donald has contributed $5,000 to the account on his birthday. He plans to make the 40", and final, $5,000 contribution on his 60th birthday, after which he plans to retire. In other words, by the time Donald has made all of his contributions he will have made one contribution of $10,000 followed by 40 annual contributions of $5,000. Jerry plans to retire on the same day (which will be his 65" birthday); however, until now, he has saved nothing for retirement.

Jerry's plan is to start contributing a fixed amount each year on his birthday; the first contribution will occur today. Jerry's 36", and final, contribution will occur on his 65" birthday. Jerry's goal is to have the same amount when he retires at age 65 that Donald will have at age 60. Assume that both accounts have an expected annual return of 12 percent. How much does Jerry need to contribute each year in order to meet his goal?

Reference no: EM132744870

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