An engineer who is now 65 years old began planning for retirement 40 years ago. At that time, he thought that if he had $1 million when he retired, he would have more than enough money to live his remaining life in luxury. Assume the inflation rate over the 40-year time period averaged a constant 4% per year. (a) What is the CV purchasing power of his $1 million at age 65? (Hint: Use the day he started 40 years ago as the base year. (b) How many future dollars should he have accumulated over the 40 years to have a CV purchasing power equal to $1 million at his current age of 65?
An engineer who is now 65 years old began planning for retirement 40 years ago. At that time, he thought that if he had $1 million when he retired, he would have more than enough money to live his remaining life in luxury. Assume the inflation rate over the 40-year time period averaged a constant 4% per year. (a) What is the CV purchasing power of his $1 million at age 65? (Hint: Use the day he started 40 years ago as the base year. (b) How many future dollars should he have accumulated over the 40 years to have a CV purchasing power equal to $1 million at his current age of 65?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 10P
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Question
An engineer who is now 65 years old began planning
for retirement 40 years ago. At that time, he
thought that if he had $1 million when he retired,
he would have more than enough money to live his
remaining life in luxury. Assume the inflation rate
over the 40-year time period averaged a constant
4% per year. (a) What is the CV
of his $1 million at age 65? (Hint: Use the day he
started 40 years ago as the base year. (b) How
many future dollars should he have accumulated
over the 40 years to have a CV purchasing power
equal to $1 million at his current age of 65?
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