On her 23rd birthday. an engineer decides to start saving toward building up a retirement fund that pays 9% interest compounded quarterly (market interest rate). She feels that $800.000 worth of purchasing power in today's dollars will be adequate to see her through her sunset years after her 63rd birthday. Assume a general inflation rate of 5% per year. (a) If she plans to save by making 160 equal quarterly deposits, what should be the amount of each quarterly deposit in actual dollars?(b) If she plans to save by making end-of-the-year deposits, increasing by $1,000 over each subsequent year, how much would her first deposit be in actual dollars?
On her 23rd birthday. an engineer decides to start saving toward building up a retirement fund that pays 9% interest compounded quarterly (market interest rate). She feels that $800.000 worth of purchasing power in today's dollars will be adequate to see her through her sunset years after her 63rd birthday. Assume a general inflation rate of 5% per year. (a) If she plans to save by making 160 equal quarterly deposits, what should be the amount of each quarterly deposit in actual dollars?(b) If she plans to save by making end-of-the-year deposits, increasing by $1,000 over each subsequent year, how much would her first deposit be in actual dollars?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 39P
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On her 23rd birthday. an engineer decides to start saving toward building up a retirement fund that pays 9% interest compounded quarterly (market interest rate). She feels that $800.000 worth of
(a) If she plans to save by making 160 equal quarterly deposits, what should be the amount of each quarterly deposit in actual dollars?
(b) If she plans to save by making end-of-the-year deposits, increasing by $1,000 over each subsequent year, how much would her first deposit be in actual dollars?
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