You are saving for retirement. To live comfortably, you decide you will need to save $1,800,000 by the time you are age 67. Today is your 30th birthday, and you decide, starting today and continuing on every birthday up to and including your 67th birthday, that you will put the same amount into a savings account. If the interest rate is 9%, you set aside $6,368.76 each year to make sure that you will have $1,800,000 in the account on your 67th birthday. You realize that your plan has a flaw. Because your income will increase over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount aside each year, you decide to let the amount that you set aside grow by 7% per year. Under this plan, how much will you put into the account today? (Recall that you are planning to make the first contribution to the account today.) The first payment is $ (Round to the nearest cent.)
You are saving for retirement. To live comfortably, you decide you will need to save $1,800,000 by the time you are age 67. Today is your 30th birthday, and you decide, starting today and continuing on every birthday up to and including your 67th birthday, that you will put the same amount into a savings account. If the interest rate is 9%, you set aside $6,368.76 each year to make sure that you will have $1,800,000 in the account on your 67th birthday. You realize that your plan has a flaw. Because your income will increase over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount aside each year, you decide to let the amount that you set aside grow by 7% per year. Under this plan, how much will you put into the account today? (Recall that you are planning to make the first contribution to the account today.) The first payment is $ (Round to the nearest cent.)
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 3PB: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...
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Transcribed Image Text:You are saving for retirement. To live comfortably, you decide you will need to save $1,800,000 by the time you are age 67. Today is your 30th birthday, and you decide, starting
today and continuing on every birthday up to and including your 67th birthday, that you will put the same amount into a savings account. If the interest rate is 9%, you set aside
$6,368.76 each year to make sure that you will have $1,800,000 in the account on your 67th birthday. You realize that your plan has a flaw. Because your income will increase
over your lifetime, it would be more realistic to save less now and more later. Instead of putting the same amount aside each year, you decide to let the amount that you set aside
grow by 7% per year. Under this plan, how much will you put into the account today? (Recall that you are planning to make the first contribution to the account today.)
The first payment is $
(Round to the nearest cent.)
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