Question
19. You are currently 43 years old and expect to retire in 25 years, and then you expect to live for another 20 years after
19. You are currently 43 years old and expect to retire in 25 years, and then you expect to live for another 20 years after retirement. Your current labor income is about $60,000. Assuming you have no savings, how much do you need to save from this point until retirement in order to replace 75% of your current income during retirement? (Assume no increase in wage and that your rate of interest will exceed inflation by 3%) (4 pts)
20. Cindy, who will graduate from college in a year is deciding whether to go on for her masters degree which will last two years. She figures that if she takes a job immediately, she can earn $40,000 per year in real terms for the remainder of her working years. If she goes on for two more years of graduate study, however, she can increase her earnings to $50,000 per year. The cost of tuition is $40,000 per year in real terms. Is this a worthwhile investment if the real interest rate is 5% per year?(Assume she will retire after working for 40 years. AND SHOW YOUR WORK)4 pts.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started