-2-QUESTION 1:Usman 21 years old works at Noman Power Systems. His current salary is $50,000, which isexpected to increase at 5% p.a. for the next 5 years (yrs. 22-26 inclusive). After that he will bepromoted to the position of section head and his salary will jump by 20% (yr. 27). Thereafter heexpects pay raises of 3% p.a. until he retires. He will save 10% of his salary for 24 years until hismortgage loan is paid off. After that he will save 20% per year until he retires. All his savingswill be inside RRSP. His after tax rate of return is 4.9% p.a. His marginal tax rate is 30%. Allsavings are at the end of the year.a. How much will he have saved by age 45.b. If he retires at age 65, he will need to have saved $4,000,000 for a comfortableretirement. How much more does he need to save each year from age 46 to 65 inclusive, inaddition to the 20% of the salary he is already saving, to retire at age 65.Assume additional saving is an ordinary annuity.

The Future Value of a lump sum: The value of an investment made at the beginning of the investment…

Answered: -2- QUESTION 1: Usman 21 years old…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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