3. You plan to retire in 40 years. Upon retirement, you plan to spend US$40,000.00 per year

for 30 years.

a. At a discount rate of 7.00% per year, how much do you need to have saved up in 40

years if you are to meet up with your retirement objectives?

b. Using the answer to part (a) and a compound rate of 8.00%, how much would you

have to save yearly for the next 40 years if you are to meet up with your retirement

objective?

c. Suppose you seek to spend US$40,000.00 per year for 30 years during retirement in

real purchasing power terms, as opposed to nominal purchasing power. Suppose

inflation equals 3% per year; how do your answers to parts (a) and (b) alter - number

answers to follow, parts (c) and (d).