A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8 percent interest on retirement savings. 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. How would the answer to part (a) change if the couple also realizes that in 20 years, they will need to spend $60,000 on their child’s college education?
A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8 percent interest on retirement savings. 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. How would the answer to part (a) change if the couple also realizes that in 20 years, they will need to spend $60,000 on their child’s college education?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 35P
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- A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8 percent interest on retirement savings.
- 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.
- How would the answer to part (a) change if the couple also realizes that in 20 years, they will need to spend $60,000 on their child’s college education?
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