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Ms. Patricia Sullivan plans to create a fund from her lottery winnings to meet three objectives....

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Finance

Ms. Patricia Sullivan plans to create a fund from her lotterywinnings to meet three objectives. First, she wants to create afund so that her mother can withdraw $20,000 per month for theremainder of her expected life of 20 years. Second, she wants topay the down payment for her brother to buy a house upon graduationfrom college four years from now. She expects that he will need$100,000 for down payment at that time. Finally, she wants toretire after 15 years and be able to withdraw $30,000 per monthstarting a month from her retirement. She expects to live for 30years after retirement. All monies earn 8 percent compoundedmonthly and all cash flows occur at the end of the relevant period.(Answers are rounded.) How much money does she need to invest todayto meet her first, 2nd and 3rd objective? Thank you. Emmy

Answer & Explanation Solved by verified expert
4.4 Ratings (773 Votes)
First objective Annual payment 20000 PM 240000 Payment time in years 20 One time payment Payment time Interest 8 compounded monthly Effective Interest 1812121 Effective Interest 830 PV of annuity for making pthly payment P PMT x 11 r n i Where P the present value of an annuity stream PMT the dollar amount of each annuity    See Answer
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