5.17 Calculate the real annuity. The real interest rate is 1.10/1.05 1.0476. We'll round to 4.8%. The real annuity is $3,000,000 $3,000,000 Annual payment 30-year annuity factor 1 1 $3,000,000 15.7292 -$190,728 .048 .048(1.048)30 You can spend this much each year in dollars of constant purchasing power. The purchasing power of each dollar will decline at 5% per year, so you'll need to spend more in nominal dol- lars: $190,728 x 1.05 = $200,264 in the second year, $190,728 x 1.052 = $210,278 in the third year, and so on.