Suppose you start saving for retirement when you are 45 years old. You invest $6,000 the first year and increase this amount by 3% each year to match inflation. How much money will you have saved after 25 years if the interest rate earned on the retirement account is 8% per year? (a) You will have saved $ . (Round to the nearest dollar.) (b) On the other hand, you will have saved $ if the interest rate was 3% instead of the original 8%.

Suppose you start saving for retirement when you are 45 years old. You invest $6,000 the first year and increase this amount by 3% each year to match inflation. How much money will you have saved after 25 years if the interest rate earned on the retirement account is 8% per year? (a) You will have saved $ . (Round to the nearest dollar.) (b) On the other hand, you will have saved $ if the interest rate was 3% instead of the original 8%.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

You are saving to buy a car which in 2022 costs $30,000. You intend to make 36 equal consecutive payments to an account starting one month from now. The interest rate is .5% per month, compounded monthly. If the inflation rate is 4% per year compounded annually, how much in actual dollars should the periodic payments be.
Inflation has been 2% per year in the last couple of years. At the same time, the price of paella pans has increased with 3% per year (nominal) at today's price NOK 200/unit. It is expected that inflation and the price increase for paella pans remains the same. What is the present value of selling 1000 paella pans annually for the next ten years (years 1 to 10) if the the nominal interest rate is 10%.
5. Funding the nest egg shortfall Determining Retirement Shortfall Yuan and Alex have 40 years to retirement. They are taking a personal finance course and have calculated their projected retirement income and investment needs. Based on their calculations and taking into account their Social Security and pension incomes, they have a projected shortfall of $6,750.00 per year. Use the following tables to answer the questions about future value interest factors. Interest Factors-Future Value Interest Factors-Future Value of an Annuity Periods 3.00% 5.00% 6.00% 8.00% 9.00% 5.600 1.810 2.090 3.386 4.290 2.653 3.210 4.661 6.848 8.620 2.420 4.322 5.740 10.062 13.260 20.410 2.810 5.516 7.690 14.785 20 25 30 35 40 3.260 7.040 10 280 21 724 31 410 = The impact of the inflation factor Continuing their worksheet, they consult a friend, economics professor Dr. Wu, who believes that they can expect the average annual inflation rate to be 5%, possibly 6% tops. Complete the following table by…
1. If a person's salary was P6000 in year 2009, what should it be today if the person received only a cost-of-living raise each year of 1.61% ?
A renewable energy industry is one of the promising sectors in future and play a major role in the vision 2030. If a specialized company in energy planning to upgrade their equipment now to meet future demand at cost of $200,000 or they purchase the upgrade package three years from now at cost of $300,000. Assume that the minimum attractive rate of return is 12% per year and the inflation is 3% per year. If the company decided to purchase the upgrade 3 years from now considering inflation what will be the cost?
Find the present worth of earthmoving equipment that has a first cost today of $145,000, an annual operating cost of $60,000, and a salvage value of 20% of the first cost after 5 years, these estimates being in future dollars. Assume that the real interest rate is 12% per year and that inflation has averaged 7% per year. Solve with inflation (a) not accounted for and (b) accounted for. a) The present worth with inflation not accounted for is $ b) The present worth with inflation accounted for is $
Your manager has decided to invest $4350 dollars at an annual interest rate of 8.0% to buy raw material that it is needed one of the main manufacturing processes of your company. The current price of the raw material is $4.0 per kilogram. If the annual inflation is 5.0%, how many kilograms of raw material will your manager be able to purchase in 8 years? $ What would be the actual dollars amount that will be paid in 8 years for that raw material? 2$
2.........3 decimal places for the final answer
Before last year, Ellie (Luke's wife) taught music and earned $30,400. She also earned $9,600 by renting out their basement as a studio apartment. Ellie saves every month. At the end of a typical year she would have saved a total of 10% from her wages and the income earned from the basement for the entire year, and earned a total of 0.5% in interest (for the entire year). At the beginning of last year, Ellie stopped teaching music. She also stopped renting out their basement, and began to use it as the office for her new web design business. The balance on her savings account was $150,000, and she took $5,000 from this account to buy a new laptop computer and a new printer (which also functions as a scanner and a facsimile). She also borrowed $12,000 from the local bank to purchase additional machinery and equipment (a graphics tablet, desktop computer, studio camera and an external hard drive). Her loan payment is $250 per month. During last year, she paid $3,000 for the lease of a…
You are trying to estimate the real interest rate for the mining industry products and proceed as follows. You consider buying coal and gold in equal proportion, spending $1000 on coal, and another $1000 on gold in today's dollars. In 4 years from now, the selling values in actual dollars are predicted to be $1,270 (coal) and $1,210 (gold). Inflation (for coal) is 1.1% per year, for the next 4 years. For gold, the gold price index is predicted to rise in the next 4 years from the current 417 points to 431 points. Compute the estimated real interest rate, as a number, with 0.001 precision. Hint: Calculate real interest rate for the cash flow: 1) invest now $1000+$1000; 2) sell in 4 years coal and gold and obtain appropriate cash flow.
Find the present worth of earthmoving equipment that has a first cost today of $139,000, an annual operating cost of $54,000, and a salvage value of 20% of the first cost after 5 years, these estimates being in future dollars. Assume that the real interest rate is 10% per year and that inflation has averaged 5% per year. Solve with inflation (a) not accounted for and (b) accounted for. a) The present worth with inflation not accounted for is $ b) The present worth with inflation accounted for is $
A bicycle tire company performed a web-based study of a popular tire retail price over time. Thestudy indicated that price is set at $16.00 per tire, it was expected to increase to $19.00 over thenext 5 years.a. Determine the annual rate of inflation over 5 years to increase the price from$16.00 to $19.00. b. Determine the market interest rate that must be used in economic equivalencecomputations if inflation is considered and real 8% per year interest rate isexpected.