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A young 25 years old engineer decides to start investing for her retirement in an investment plan with an interest rate of 8%, compounded quarterly.
A young 25 years old engineer decides to start investing for her retirement in an investment plan with an interest rate of 8%, compounded quarterly. She thinks that $600,000 having the same purchasing power than today's dollars will be enough to retire when she will be 65 years old. She estimate the inflation rate to be 2%. (a) What is the sub-period interest rate is for one quarter? Select between Part (a) Options 1 to 3. (b) What is the value of $600,000 today (year 0 or $) in current dollars at year 40 (or $40)? Select between Part (b) Options 1 to 4. (c) If she wants to have $40 2 millions (i.e. year40 dollars) and she plans to make 160 equal deposits, what should be the quarterly amount deposited in current dollars? Select between Part (c) Options 1 to 4. (d) If she plans to have $600,000 having the same purchasing power than today's dollars and to make 40 equal deposits, once every year, what should be the amount deposited in real dollars? Select between Part (d) Options 1 to 4. Select 4 correct answer(s) Part (a) - Option 1: is=2% Part (a) - Option 2: is=8% Part (a) - Option 3: is=2.7% Part (b) - Option 1: $40 271,734 Part (b) - Option 2: $40 600,000 Part (b) - Option 3: $40 1,324,824 Part (b) - Option 4: $40 1,080,000 Part (c) - Option 1: A=$ current 1,757 Part (c) - Option 2: A=$ current 8,278 Part (c) - Option 3: A=$ current 7,720 Part (c) - Option 4: A=$ current 803 Part (d) - Option 1: A=$ real 3,993 (Part (d) - Option 1: A=$ real 3,761 Part (d) - Option 1: A=$ real 2,136
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