A man desires to have a preplanned amount in a savings account when he retires in 20 years. This amount is to be equivalent to $30,000 in today’s purchasing power. If the expected average inflation rate is 7% per year and the savings account earns 5% interest, what lump sum of money should the man deposit now in his savings account?

A man desires to have a preplanned amount in a savings account when he retires in 20 years. This amount is to be equivalent to $30,000 in today’s purchasing power. If the expected average inflation rate is 7% per year and the savings account earns 5% interest, what lump sum of money should the man deposit now in his savings account?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter2: The One Lesson Of Business

Section: Chapter Questions

Problem 2.6IP

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