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Abby wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income
Abby wants to save money to meet three objectives.
- First, he would like to be able to retire 30 years from now with retirement income of $20,000 per month for 25 years, with the first payment received 30 years and 1 month from now.
- Second, he would like to purchase a condo at Mount Tremblant in 10 years at an estimated cost of $380,000.
- Third, after he passes away at the end of the 25 years of withdrawals, he would like to leave an inheritance of $900,000 to his nephew Johnny.
He can afford to save $2,500 per month for the next 10 years. He expects to earn a 10% EAR before he retires and a 7% EAR after he retires,
QUESTIONS:
- How much will he have to save each month in years 11 through 30 (show all calculations)?
- Explain the impact on the amount he would have to save in A) if his savings were a growing annuity (no need for calculations)?
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