Suppose you think if you were to retire right now, you would have needed $50,000 each year to supplement your social security and maintain your desired lifestyle. But because there is on average 3% annual inflation, when you retire 30 years from now, you need more than $50,000 per year to maintain the lifestyle you like. How much will be equivalent to $50,000 at retirement time when adjusted for inflation?What will be the face value of the bond that yields the equivalent of $50,000, found in #4 of Part B in coupon payment?How much annual payment in the retirement account is needed to accumulate the amount needed to purchase the bond when retiring? What is the purchase power of the amount that will be received by your inheritors, measured in the current value of $ at the time of opening the retirement account? (Hint: First calculate what the future value will be in 30 years, which is equivalent to $50,000 now and then solve the rest of the problem).

The figures for the actual amount of money that inflation can cost seniors are staggering. The LIMRA…

Answered: Suppose you think if you were to retire…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose you think if you were to retire right now, you would have needed $50,000 each year to supplement your social security and maintain your desired lifestyle. But because there is on average 3% annual inflation, when you retire 30 years from now, you need more than $50,000 per year to maintain the lifestyle you like.

How much will be equivalent to $50,000 at retirement time when adjusted for inflation?
What will be the face value of the bond that yields the equivalent of $50,000, found in #4 of Part B in coupon payment?
How much annual payment in the retirement account is needed to accumulate the amount needed to purchase the bond when retiring?
What is the purchase power of the amount that will be received by your inheritors, measured in the current value of $ at the time of opening the retirement account?

(Hint: First calculate what the future value will be in 30 years, which is equivalent to $50,000 now and then solve the rest of the problem).

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