A young couple, age 25, is doing some retirement planning. They hope to retire in 40 years at age 65. They expect to live for an additional 20 years, until age 85. During retirement they plan to travel and live well, so they expect to spend $80,000 per year. They believe that they can earn 5% interest on their retirement savings.

1.How much money should this couple have saved in their retirement account on the day they retire (age 65), in order to withdraw $80,000 per year during their 20 years in retirement, if they earn 5% on their retirement account? (hint: all retirement funds will be spent)

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2.How much could this couple spend each year in retirement if they wanted to be sure to leave an inheritance of $250,000 for their grandchildren? (hint: the initial amount in their retirement account will not change)

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3.How much must they invest each year, beginning at age 25, in order to reach their retirement goal by age 65, assuming they earn 7% compounded annually on their investment?

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4.How much must they invest each year, beginning at age 25, in order to reach their retirement goal by age 65, assuming they earn 7% compounded quarterly annually on their investment?

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