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[10 points] You are doing some retirement planning and believe you can live on $60,000 per year in retirement (in today's dollars). a. If you
[10 points] You are doing some retirement planning and believe you can live on $60,000 per year in retirement (in today's dollars). a. If you expect average annual inflation to be 2.5% over the next 35 years until you retire, determine what your annual salary needs to be to keep the same purchasing power you have today with $60,000. (FV of a lump sum) 60,000(1.025)35=$142,392 b. If you plan to live for 40 years after retirement, determine the total amount you will need at the start of retirement to provide yourself the annual income you calculated in part a. Assume you expect to earn 4% in retirement. (PV of an annuity due - begin of period payment) c. Determine how much you need to save at the end of each month for the next 35 years while you are working to end up with the amount you calculated in part b. when you retire. Assume you expect to earn 8% on investments while working. (PMT - ordinary annuity)
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