A couple will retire in 50 years; they plan to spend about $30,000 a year (in current dollars) in retirement, which should last about 25 years. They believe that they can earn a real interest rate of 8% on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Annual savings b. How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $60,000 on their child's college education?
A couple will retire in 50 years; they plan to spend about $30,000 a year (in current dollars) in retirement, which should last about 25 years. They believe that they can earn a real interest rate of 8% on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Annual savings b. How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $60,000 on their child's college education?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 8EB: You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how...
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