Question

Your grandparents are talking about their retirement in a year. They told you that they should have enough in their retirement funds to pull $50,000 a year for 20 years, starting one year from today. If the discount rate is 5 percent, how much should they have in their retirement account now?

Answer 1

Answer:

$623,110.52

Explanation:

We use the present value function to calculate the amount available now that is shown in the attached spreadsheet. Kindly find it below:

Future value = $0

Rate of interest = 5%

NPER = 20 years

PMT = $50,000

The formula is shown below:

= PV(Rate;NPER;-PMT;FV;type)

So, after solving this, the present value is $623,110.52