You expect to start working three years from today, and to work for 30 years thereafter. In years 4 through 13 (i.e years 1 through 10 of your working career) your salary will be $55,000. In year 14, your salary will increase by $5,000 and continue at this new level through the end of year 18. In year 19, your salary will increase by a further 20%. It will remain at this new level for the rest of your working life. Assume that you expect to live 30 yeas following the date of your retirement, and that the appropriate discount rate is 8%, compounded annually. Further assume that all income is received at the end of each year. Suppose that you wish to spend an equal amount in each of the next 33 years, and that your annual retirement will be 20% lower than our spending in the first 33 years. How much will you be able to spend in each of the first 33 years, and in each of your retirement? (Assume that your entire spending takes place at the beginning of each year).
You expect to start working three years from today, and to work for 30 years thereafter. In years 4 through 13 (i.e years 1 through 10 of your working career) your salary will be $55,000. In year 14, your salary will increase by $5,000 and continue at this new level through the end of year 18. In year 19, your salary will increase by a further 20%. It will remain at this new level for the rest of your working life. Assume that you expect to live 30 yeas following the date of your retirement, and that the appropriate discount rate is 8%, compounded annually. Further assume that all income is received at the end of each year.
Suppose that you wish to spend an equal amount in each of the next 33 years, and that your annual retirement will be 20% lower than our spending in the first 33 years. How much will you be able to spend in each of the first 33 years, and in each of your retirement? (Assume that your entire spending takes place at the beginning of each year).
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