Steve, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on a 9% basis that will enable him to withdraw $67,000 per year on June 30, beginning in 2021 and continuing through 2024. To develop this fund, Steve intends to make equal contributions on June 30 of each of the years 2017–2020. How much must the balance of the fund equal on June 30, 2020, in order for Steve to satisfy his objective? (Round factor values to 5 decimal places, e.g. 1.25124, and final answer to 2 decimal places, e.g. 4,585.81.) Balance of the fund equal on June 30, 2020 $enter the balance of the fund equal on June 30, 2020 in dollars check_circle Step 1 Steve will withdraw $67,000 per year for four years from June 2021 to 2024 Present value of an annuity of $67,000 per year discounted at 9% per year Value of fund as of June 30 2020 can be calculated using the following formula: Drawings per year x (1 –(1+r)-n/Rate) R= Rate per period N = Number of Periods Step 2 Balance in the fund as on 30 June 2017: = Drawings per year x (1 –(1+r)-n/Rate) = $67000 x (1-(1+0.09)-4/0.09) = $67000 x 3.23972 = $217,061.23 Balance in the fund as of June 3, 2020 : $217,061.23 What is each of Steve’s contributions to the fund? (Round factor values to 5 decimal places, e.g. 1.25124, and final answer to 2 decimal places, e.g. 4,585.81.) Steve’s contributions to the fund
Steve, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on a 9% basis that will enable him to withdraw $67,000 per year on June 30, beginning in 2021 and continuing through 2024. To develop this fund, Steve intends to make equal contributions on June 30 of each of the years 2017–2020. How much must the balance of the fund equal on June 30, 2020, in order for Steve to satisfy his objective? (Round factor values to 5 decimal places, e.g. 1.25124, and final answer to 2 decimal places, e.g. 4,585.81.) Balance of the fund equal on June 30, 2020 $enter the balance of the fund equal on June 30, 2020 in dollars check_circle Step 1 Steve will withdraw $67,000 per year for four years from June 2021 to 2024 Present value of an annuity of $67,000 per year discounted at 9% per year Value of fund as of June 30 2020 can be calculated using the following formula: Drawings per year x (1 –(1+r)-n/Rate) R= Rate per period N = Number of Periods Step 2 Balance in the fund as on 30 June 2017: = Drawings per year x (1 –(1+r)-n/Rate) = $67000 x (1-(1+0.09)-4/0.09) = $67000 x 3.23972 = $217,061.23 Balance in the fund as of June 3, 2020 : $217,061.23 What is each of Steve’s contributions to the fund? (Round factor values to 5 decimal places, e.g. 1.25124, and final answer to 2 decimal places, e.g. 4,585.81.) Steve’s contributions to the fund
Chapter3: Computing The Tax
Section: Chapter Questions
Problem 43P
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Question
Steve, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on a 9% basis that will enable him to withdraw $67,000 per year on June 30, beginning in 2021 and continuing through 2024. To develop this fund, Steve intends to make equal contributions on June 30 of each of the years 2017–2020.
How much must the balance of the fund equal on June 30, 2020, in order for Steve to satisfy his objective? (Round factor values to 5 decimal places, e.g. 1.25124, and final answer to 2 decimal places, e.g. 4,585.81.)
| Balance of the fund equal on June 30, 2020 |
$enter the balance of the fund equal on June 30, 2020 in dollars
|
check_circle
Step 1
Steve will withdraw $67,000 per year for four years from June 2021 to 2024
Present value of an annuity of $67,000 per year discounted at 9% per year
Value of fund as of June 30 2020 can be calculated using the following formula:
Drawings per year x (1 –(1+r)-n/Rate)
R= Rate per period
N = Number of Periods
Step 2
Balance in the fund as on 30 June 2017:
= Drawings per year x (1 –(1+r)-n/Rate)
= $67000 x (1-(1+0.09)-4/0.09)
= $67000 x 3.23972
= $217,061.23
Balance in the fund as of June 3, 2020 : $217,061.23
What is each of Steve’s contributions to the fund? (Round factor values to 5 decimal places, e.g. 1.25124, and final answer to 2 decimal places, e.g. 4,585.81.)
| Steve’s contributions to the fund |
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