Question
A person who is currently 23 years old plans to open an investment fund for retirement. To do this, he plans to save a certain
A person who is currently 23 years old plans to open an investment fund for retirement. To do this, he plans to save a certain constant annual amount for the next 42 years, which he estimates would be his working life. This means that he would start saving at the age of 24 and up to 65 years. He estimates that he would fully enjoy his savings in this investment fund for an additional 25 years after he retired, beginning with his first income from his savings at the age of 66. They'd like to have a purchasing power at the age of 66 years equivalent to $240,000 per year at today's value, and also that these revenues would grow at the same rate as inflation.
Consider that annual inflation is 3%, and the interest rate that would be given by the investment fund for the pension is 5% per year, during the entire analysis period.
A) How much would they have to save yearly to meet their goal?
B) How much would they have to save monthly to meet their goal?
Using Excel is okay, as long as there is a detailed procedure. Thank you.
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