Cynthia currently has $55,000 in her RRSP She plans to contribute $7000 at the end of each year for the next 17 years and then use the accumulated funds to purchase a 20 year annuity making end of month payments a Assume that her RRSP earns 8 75 compounded annually for the next 17 years, and the fu...

a At a focal date 17 years from now FV of 55000 and ...

Cynthia currently has $55,000 in her RRSP. She plans to contribute $7000 at the end of each

Question:

Cynthia currently has $55,000 in her RRSP. She plans to contribute $7000 at the end of each year for the next 17 years and then use the accumulated funds to purchase a 20-year making end-of-month payments.
a. Assume that her RRSP earns 8.75% compounded annually for the next 17 years, and the fund from which the is paid will earn 5.4% compounded monthly. What monthly payments will she receive?
b. If the average annual rate of inflation for the next 17 yearsis2 %, what will be the purchasing power in today’s dollars of the monthly payments 17 years from now?
Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...