It is 2016, you've just graduated college, and you are contemplating your lifetime budget. You think your eneral pre-retirement living expenses will average around $50,000 a year. For the next 8 years, you will r n apartment for $16,000 a year (assume end-of-period payments). At the end of Year 8, you will want to house that should cost around $250,000. In addition, you will need to buy a new car roughly once every ears, starting now and continuing for the next 50 years, costing around $30,000 each. In 25 years, you wi ave to put aside around $150,000 to put a child through college, and in 30 years you'll need to do the sa or another child. In 50 years, you will retire and will need to have accumulated enough savings to support oughly 20 years of retirement spending of around $35,000 a year on top of your Social Security benefits. terest rate is 5% per year. What average salary will you need to earn to support this lifetime consumption lan? (Do not round intermediate calculations. Round your answer to the nearest whole dollar. All spendi mounts are in real dollars.)
It is 2016, you've just graduated college, and you are contemplating your lifetime budget. You think your eneral pre-retirement living expenses will average around $50,000 a year. For the next 8 years, you will r n apartment for $16,000 a year (assume end-of-period payments). At the end of Year 8, you will want to house that should cost around $250,000. In addition, you will need to buy a new car roughly once every ears, starting now and continuing for the next 50 years, costing around $30,000 each. In 25 years, you wi ave to put aside around $150,000 to put a child through college, and in 30 years you'll need to do the sa or another child. In 50 years, you will retire and will need to have accumulated enough savings to support oughly 20 years of retirement spending of around $35,000 a year on top of your Social Security benefits. terest rate is 5% per year. What average salary will you need to earn to support this lifetime consumption lan? (Do not round intermediate calculations. Round your answer to the nearest whole dollar. All spendi mounts are in real dollars.)
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:a. It is 2016, you've just graduated college, and you are contemplating your lifetime budget. You think your
general pre-retirement living expenses will average around $50,000 a year. For the next 8 years, you will rent
an apartment for $16,000 a year (assume end-of-period payments). At the end of Year 8, you will want to buy
a house that should cost around $250,000. In addition, you will need to buy a new car roughly once every 10
years, starting now and continuing for the next 50 years, costing around $30,000 each. In 25 years, you will
have to put aside around $150,000 to put a child through college, and in 30 years you'll need to do the same
for another child. In 50 years, you will retire and will need to have accumulated enough savings to support
roughly 20 years of retirement spending of around $35,000 a year on top of your Social Security benefits. The
interest rate is 5% per year. What average salary will you need to earn to support this lifetime consumption
plan? (Do not round intermediate calculations. Round your answer to the nearest whole dollar. All spending
amounts are in real dollars.)
b. Whoops! You just realized that the inflation rate over your lifetime is likely to average about 3% per year,
and you need to redo your calculations. As a rough cut, it seems reasonable to assume that all relevant prices
and wages will increase at around the rate of inflation. What is your new estimate of the required salary (in
today's dollars)? (Do not round intermediate calculations. Round your answer to the nearest whole dollar. All
spending amounts are in real dollars.)
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