A couple will retire in 50 years they plan to spend about $30000 a tear in...
A couple will retire in 50 years they plan to spend about $30000
a tear in retirement, which should last about 25 years. They
believe that they can earn 8% interest on retirement savings. The
inflation rate over the next 75 years is expected to average
5%.
a. How much do they need to save in nominal terms in the last
year?
b. What will be their nominal expenditures in the first year of retirement?
c. What will be their nominal expenditures in the last year of retirement?
Homework Answers
Q - How much do they need to save in nominal terms in the last year
Ans - $ 56,282.92
Q - What will be their nominal expenditures in the first year of retirement?
Ans - $ 344,021.99
i.e Investment amount today * (1+ Inflation rate)*50 Years
= $ 30,000 * (1+0.05)*50
= $ 344,021.99
Q - What will be their nominal expenditures in the last year of retirement ?
i.e Investment amount today * (1+ Inflation rate)*75 Years
= $ 30,000 * (1+0.05)*75
= $ 1,164,980.58
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