couple will retire in 40 years; they plan to spend about $31,000 a year (in current dollars) in retirement, which should last about 20 years. They believe that they can earn a real interest rate of 7% 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 realize that in 15 years they will need to spend $61,000 on their child’s college education?
couple will retire in 40 years; they plan to spend about $31,000 a year (in current dollars) in retirement, which should last about 20 years. They believe that they can earn a real interest rate of 7% 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 realize that in 15 years they will need to spend $61,000 on their child’s college education?
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
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A couple will retire in 40 years; they plan to spend about $31,000 a year (in current dollars) in retirement, which should last about 20 years. They believe that they can earn a real interest rate of 7% 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 realize that in 15 years they will need to spend $61,000 on their child’s college education?
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