Consider the following statement: "If you are 20 years of age and save $1.00 each day for the rest of your life, you can become a millionaire." Assume that you live to age 80 and that the annual interest rate is 12%. Under these specific conditions, we compute the future compound amount (F): $2,727,149. If inflation is expected to average 3% per year over the next 60 years, your purchasing power will be less than $2,727,149. a. When f=3% per year, what is the purchasing power of this future sum of money in today's dollars when you reach age 80? b. Repeat Part (a) when inflation averages 1% per year. Click the icon to view the interest and annuity table for discrete compounding when i=1% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 3% per year. a. The purchasing power is S thousand. (Round to the nearest whole number.) b. The purchasing power is $ thousand. (Round to the nearest whole number.)
Consider the following statement: "If you are 20 years of age and save $1.00 each day for the rest of your life, you can become a millionaire." Assume that you live to age 80 and that the annual interest rate is 12%. Under these specific conditions, we compute the future compound amount (F): $2,727,149. If inflation is expected to average 3% per year over the next 60 years, your purchasing power will be less than $2,727,149. a. When f=3% per year, what is the purchasing power of this future sum of money in today's dollars when you reach age 80? b. Repeat Part (a) when inflation averages 1% per year. Click the icon to view the interest and annuity table for discrete compounding when i=1% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 3% per year. a. The purchasing power is S thousand. (Round to the nearest whole number.) b. The purchasing power is $ thousand. (Round to the nearest whole number.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider the following statement: "If you are 20 years of age and save $1.00 each day for the rest of your life, you can become a millionaire." Assume that you live to age 80 and that the annual interest rate is 12%.
Under these specific conditions, we compute the future compound amount (F): $2,727,149. If inflation is expected to average 3% per year over the next 60 years, your purchasing power will be less than $2,727,149.
a. When f= 3% per year, what is the purchasing power of this future sum of money in today's dollars when you reach age 80?
b. Repeat Part (a) when inflation averages 1% per year.
Click the icon to view the interest and annuity table for discrete compounding when i = 1% per year.
Click the icon to view the interest and annuity table for discrete compounding when /=3% per year.
a. The purchasing power is $ thousand. (Round to the nearest whole number.)
b. The purchasing power is $ thousand. (Round to the nearest whole number.)
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