Question

As part of your retirement plan, you want to set up an annuity in which a regular payment of $80,121 is made at the end of each year. You need to determine how much money must be deposited earning 10% compounded annually in order to make the annuity payment for 20 years. Round your answer to the nearest cent.
a.
$680,153.78
c.
$682,115.24
b.
$681,426.87
d.
$683,759.64

Answer 1

I'm honestly just confused. Which formula am I using? I scoured google, but can't find anyhting.

Answer 2

I think I can find a formula.
Gee, this seems like a tough question.

Answer 3

Here are some annuity formulas:
http://www.1728.org/annuity2.htm

Answer 4

Thanks! I'll try some of those out.

Answer 5

http://www.thecalculatorsite.com/articles/finance/compound-interest-formula.php

Answer 6

Here are some annuity PAYOUT formulas :
http://www.1728.org/annupay2.htm

I think the second formula on that page is the one to use.

Answer 7

Gratzi. I tried a few of the earlier ones, and I ended up messing up. Thanks for that wolf, tor. I'll use the second one

Answer 8

Using the calculator here:
http://www.1728.org/annupay.htm
I calculated the amount needed is
$682,115.24

But I guess they want to see it worked out.
I think I can do that too.

Answer 9

c.
$682,115.24.

At first I got A, but I typed in a wrong value on my calculator. Had to go back and recheck when I saw your answer. I have the work, no worries o:

Answer 10

Principal = Annual Payout * ([(1 + rate)^years]-1) / rate * (1 + rate) ^ years

Principal = $80,121 * [(1.10^20)-1] / (.10 * 1.10^20)

Principal = $80,121* 5.7274999493 / (.10 * 6.7274999493)

Principal = 458893.023437865 / .67274999493

Principal = 682,115.238790322

Principal = 682,115.24 (rounded)