Mr Parmar Wants to Retire in 20 Years and Purchase

question 29

Short Answer

Mr. Parmar wants to retire in 20 years and purchase a 25-year annuity that will make equal payments at the end of every quarter. The first payment should have the purchasing power of $6,000 in today's dollars. If he already has $54,000 in his RRSP, what contributions must he make at the end of every half-year for the next 20 years to achieve his retirement goal? Assume that the rate of inflation for the next 20 years will be 2.5%, the RRSP will earn 8% compounded semi-annually, and the rate of return on the fund from which the annuity is paid will be 5.5% compounded quarterly.

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