Your pension plan is an annuity with a guaranteed return of 4% per year (compounded quarterly). You can afford to put $1,200 per quarter into the fund, and you will work for 40 years before retiring. After you retire, you will be paid a quarterly pension based on a 25-year payout. How much will you receive each quarter?

Question

tkhunny · Answer

Well, you will have to accumulate, first.  What's your plan?

anonymous · Answer

It doesn't say anything, this is all the problem

tkhunny · Answer

I didn't ask for your instructions.  I asked for your plan.  How do you accumulate an annuity?  Presumably you have some experience in adding up Geometric Series OR you have a lovely formula for accumulation.  Which is it?

anonymous · Answer

PV=PMT[1-(1+r/m)^mt/r/m)

anonymous · Answer

where pv is present value, pmt is the periodic payments, r is rate and m is the compound interest

tkhunny · Answer

It is not quite written correctly.

PV=PMT[[1-(1+r/m)^(mt)]/(r/m))

However, that starts with PV.  We need FV if we are to be accumulating.

anonymous · Answer

then, FV=PV(1+r/m)^mt

tkhunny · Answer

If you wish to combine those two formulas, then you will have it.

tkhunny · Answer

That will get you the accumulation.  After that, you still need that PV to find the retirement income.

anonymous · Answer

Ok! i'm gonna try!! Thank you so much!!! (: