Chapter 5.6, Problem 12E

Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now $35$ years old, and she will retire when she is $65$. She wants to receive annual payouts for twenty years, and she wants those payouts to receive an annual COLA of $4\%$.

a. She wants her first payout to have the same purchasing power as does $\$15,000$ today. How big should that payout be if she assumes inflation of $4\%$ per year?

b. How much money must she deposit when she is $65$ if her money earns $8.3\%$ interest per year?

c. How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate)

d. How large a monthly payment would she make if she waits until she is $40$ before starting her ordinary annuity?