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Second Spring Co
Second Spring Co. offers a retirement plan which requires individuals to deposit $25000 now. For thirty five years, your deposit is subjected to annual 8.8%, compounding monthly. After thirty five years, the retirement plan makes monthly payments perpetually with 15% annual interest. What is the amount of monthly payments that will be received perpetually? O a. $6,592.07 O b. $7,612.38 O c. $34,508.56 O d. $79,104.86 O e. $91,348.53
Expert Solution
current deposit(PV)=25000
FV of deposit after 35 years=PV*(1+r)^n
where r=int rate monthly=8.8/12=.7333% ; n=no of months=35*12=420
FV=25000*(1+.7333%)^420 =537881.03;
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Monthly interest after retirement=15/12=1.25%
Amount of monthly payment received perpetually= monthly interest*FV
=.0125*537881.03
=6592.07 (option A) appxmate
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