Question

Question 3 (0.5 points) You just graduated from college and landed your first "real" job, which pays $25,000 a year. In 12 years how much will you need to earn to maintain the same purchasing power if inflation is 0.75% per year? Your Answer: Answer Question 4 (0.5 points) You save $600 a year into a 401(k) account that you invest in a mutual fund earning 7% per year. You plan to retire in 30 years. How much money will you have in your account at retirement? Your Answer:

Answer 1

Answer to Question 3:

Current Payment = $25,000
Inflation Rate = 0.75%

Payment in 12 years = Current Payment * (1 + Inflation Rate)^Period
Payment in 12 years = $25,000 * 1.0075^12
Payment in 12 years = $25,000 * 1.093807
Payment in 12 years = $27,345.18

Answer to Question 4:

Annual Saving = $600
Interest Rate = 7%
Time to Retirement = 30 years

Accumulated Sum in 30 years = $600*1.07^29 + $600*1.07^28 + … + $600*1.07 + $600
Accumulated Sum in 30 years = $600 * (1.07^30 - 1) / 0.07
Accumulated Sum in 30 years = $600 * 94.460786
Accumulated Sum in 30 years = $56,676.47