A couple will retire in 40 years; they plan to spend about $39,000 a year in retirement, which should last about 20 years. They believe that they can earn 8% interest 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. b. How would the answer to part (a) change if the couple also realizes that in 15 years they will need to spend $69,000 on their child's college education?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 43P
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Hi expart please help answer the general accounting question

A couple will retire in 40 years; they plan to spend about
$39,000 a year in retirement, which should last about 20 years.
They believe that they can earn 8% interest 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.
b. How would the answer to part (a) change if the couple also
realizes that in 15 years they will need to spend $69,000 on
their child's college education?
Transcribed Image Text:A couple will retire in 40 years; they plan to spend about $39,000 a year in retirement, which should last about 20 years. They believe that they can earn 8% interest 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. b. How would the answer to part (a) change if the couple also realizes that in 15 years they will need to spend $69,000 on their child's college education?
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