a) What is the nominal value of the retirement fund the couple must have by the time they retire in 30 years to make it possible? b) How much do they need to save in nominal terms each year to create the retirement fund in part a)? c) If the couple successfully achieve their goal, what will be their nominal expenditures in the last year of retirement (year 50)?
a) What is the nominal value of the retirement fund the couple must have by the time they retire in 30 years to make it possible? b) How much do they need to save in nominal terms each year to create the retirement fund in part a)? c) If the couple successfully achieve their goal, what will be their nominal expenditures in the last year of retirement (year 50)?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 23P
Related questions
Question
A couple will retire in 30 years: they plan to spend about $30,000 a year (in real value) in retirement, which should last about 20 years. They believe that they can earn 6% nominal return on retirement portfolio account. The inflation rate over the next 50 years is expected to average 2%.
a) What is the nominal value of the retirement fund the couple must have by the time they retire in 30 years to make it possible?
b) How much do they need to save in nominal terms each year to create the retirement fund in part a)?
c) If the couple successfully achieve their goal, what will be their nominal expenditures in the last year of retirement (year 50)?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College