REQUIRED ANNUITY PAYMENTS Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $40,000 has today. (The real 178 Part 2 Fundamental Concepts in Financial Management Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).

Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 5%. He currently has $100,000 saved, and he expects to earn 8% annually on his savings. How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal?

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