Suppose I start saving for my retirement on my 45th birthday by depositing $1000 in a retirement savings account that earns 5% per year. Each year I increase the deposit by $100, so on my 46th birthday I deposit $1100, on my 47th birthday I deposit $1200, etc. I continue making deposits until my 64th birthday which is when I make my final deposit. On my 65th birthday I will make my first withdrawal of $X. I expect inflation to be about 3% per year so I plan to increase my withdrawals to accommodate for that (at 3% annually). I expect my final withdrawal to be on my 95th birthday. What can I afford my first withdrawal of $X to be?

Suppose I start saving for my retirement on my 45th birthday by depositing $1000 in a retirement savings account that earns 5% per year. Each year I increase the deposit by $100, so on my 46th birthday I deposit $1100, on my 47th birthday I deposit $1200, etc. I continue making deposits until my 64th birthday which is when I make my final deposit. On my 65th birthday I will make my first withdrawal of $X. I expect inflation to be about 3% per year so I plan to increase my withdrawals to accommodate for that (at 3% annually). I expect my final withdrawal to be on my 95th birthday. What can I afford my first withdrawal of $X to be?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose I start saving for my retirement on my 45th birthday by depositing $1000 in
a retirement savings account that earns 5% per year. Each year I increase the deposit
by $100, so on my 46th birthday I deposit $1100, on my 47th birthday I deposit
$1200, etc.. I continue making deposits until my 64th birthday which is when I make
my final deposit. On my 65th birthday I will make my first withdrawal of $X. I expect
inflation to be about 3% per year so I plan to increase my withdrawals to
accommodate for that (at 3% annually). I expect my final withdrawal to be on my
95th birthday. What can I afford my first withdrawal of $X to be?
Note: be careful with counting the number of deposits and withdrawals! Our
convention in the course is that when available, we use factor table values for all but
the (F/P..) and (P/F.) factors, in which case we use the equations.
Your solution should be within $30 of mine.
2516
2576
2636
2696
None of the above

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