2. 34. Real cash flows [LO 7.4] You are planning to save for retirement over the next...
Question:
2. 34.
Real cash flows [LO 7.4] You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $800 per month in a share account in real dollars and $400 per month in a bond account in real dollars. The effective annual return of the shares account is expected to be 11 per cent and the bond account will earn 7 per cent. When you retire, you will combine your money into an account with an effective return of 9 per cent. The returns are stated in nominal terms. The inflation rate over this period is expected to be 4 per cent. How much can you withdraw each month from your account in real terms assuming a 25-year withdrawal period? What is the nominal dollar amount of your last withdrawal?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9781743768051
8th Edition
Authors: Stephen A. Ross, Rowan Trayler, Charles Koh, Gerhard Hambusch, Kristoffer Glover, Randolph W. Westerfield, Bradford D. Jordan