Note: the abbreviations have the following meanings

PVIF= Present Value Interest FactorPVIFA= Present Value Interest Factor for an AnnuityFVIF= Future Value Interest FactorFVIFA= Future Value Interest Factor for an Annuity

They can be obtained from tables or calculated using the following equationsPVIFA( n, r%)= =[1-1/(1+r%)^n]/r%PVIF( n, r%)= =1/(1+r%)^nFVIF( n, r%)= =(1+r%)^nFVIFA( n, r%)= =[(1+r%)^n -1]/r%

n= 30r= 10.00%PVIFA 30 periods, 10% rate 9.426914

Annuity= 25,000Therefore, present value= $235,673 = 25000 x 9.426914

Answer: $235,673

n= 20r= 7.00%FVIF 20 periods, 7% rate 3.869684

Amount required in 20 years = $235,673

Therefore, amount to be invested now= $60,902

1.You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $25,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 10% per year during the 30-year retirement period.

1.       How large a fund will you need when you retire in 20 years to provide the 30-year, $25,000 retirement annuity?

2.       How much will you need today as a single amount to provide the fund calculated in part a if you earn only 9% per year during the 20 years preceding retirement? What effect would an increase in the rate you can earn both during and before retirement have on the values found in parts a and b? Explain

An increase in the interest rate will lower the amount required at the end of 20 years (calculated in part a). This is because the present value of $20,000 required for 30 years will be lower at a higher discount rate.An increase in the interest rate will lower the amount required now (claculated in part b). This is because the future value to be invested now would be greater at a higher interest rate; thus a lesser amount is required.

1.You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $25,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 10% per year

in 20 years to provide the 30-year, $25,000 retirement annuity?

as a single amount to provide the fund calculated in part a if you earn only 9% per year during the 20 years preceding retirement? What effect would an increase in the rate you can earn both during and before retirement have on the values found in parts a and

An increase in the interest rate will lower the amount required at the end of 20 years (calculated in part a). This is because the present value of $20,000

An increase in the interest rate will lower the amount required now (claculated in part b). This is because the future value to be invested now would be