A couple will retire in 50 years; they plan to spend about $34,000 a year (in current dollars) in retirement, which should last about 25 years. They believe that they can earn a real interest rate of 7% on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Annual savings $ Annual savings 761.74 b. How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $64,000 on their child's college education? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. 1,370.95

A couple will retire in 50 years; they plan to spend about $34,000 a year (in current dollars) in retirement, which should last about 25 years. They believe that they can earn a real interest rate of 7% on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Annual savings $ Annual savings 761.74 b. How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $64,000 on their child's college education? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. 1,370.95

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 14P

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