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4. Suppose that the government contributes $6,750 per child at birth and that in addition, your family contributes $500 to your retirement savings at the
4. Suppose that the government contributes $6,750 per child at birth and that in addition, your family contributes $500 to your retirement savings at the end of each year after birth. What annual rate of return is required in order for you to have $5 million after 65 years? 5. Suppose that the government only contributes $2,000 per child at birth. Assuming an annual rate of return of 8%. How much additional savings would be required at the end of each year after birth (constant annual contribution) in order for you to have $1 million after 65 years? 6. The computations above do not account for inflation. Suppose the long-run expected annual rate of inflation is 2%. What annual rate of return would be required in order to achieve an 8% rate of growth in purchasing power annually? Suppose that Ackman's plan works and you have exactly $1 million available on the day you retire. In retirement, you will invest more conservatively and expect to have a lower annual rate of return of 2.4% (use this rate for the questions below). 7. How much will you be able to withdraw at the end of each year in retirement if you expect to make your last withdrawal at age 85 (i.e. 20 withdrawals in total)? 8. Suppose that instead you would like to withdraw $100,000 at the end of each year in retirement. How long will your retirement savings of $1 million last you? 9. Suppose that you want to make monthly withdrawals in retirement and expect to make your final withdrawal at age 85 (i.e. 20 years in retirement). Which of these options are feasible for you given that you have $1 million available when you retire: 1. Withdrawing $6,000 at the end of every month. Withdrawing $10,000 at the end of each month for the first 5 years and then withdrawing $2,000 at the end of each month thereafter
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