As of the end of 2009, Amelia and Adam have a joint investment account of $400,000 in assets. They are 50 years old and plan to retire in 15 years. They expect to live for another 20 years after they retire. They have a household annual income of $200,000 of which they spend $101,000. They would like to save enough money so that they can maintain the same consumption level of 101,000 a year. The inflation rate is 4%, and the annual rate of return on investment is 10%. How much do they need to contribute to their investment account every year in order to achieve this goal. Solve the problem using the constant dollar approach (use real values and real rate of return) (1+R nom) = (1+r real) (1+inflation rate) Build a spreadsheet that solves for these two questions and shows the investment account during the two phases: the accumulation phase and the withdrawal phase. You will proceed in two steps: Phase 1: Accumulation phase 1) Calculate the real rate of return 2) Calculate the amount that Amelia and Adam need to have on their account on the day of their retirement as they aim to keep the same standard of living (same spending needs) think will you use PV or FV of annuity? 3) Calculate the PMT that they need to make annually into their retirement fund during the accumulation phase using both the excel PMT function and the formula method. Use the real rate of return (constant dollar approach) Think about which formula to use What is FV and what is PV that you will use? 4) The PMT for the nominal dollar approach will be equal to the PMT with real dollar but adjusted for the inflation rate. 5) Build the retirement plan that shows their contribution annually to the retirement fund Phase 2: Spending phase As they plan to live ...... this spending phase will have..... years so your plan will have ...... rows On the last day of their life they should have spent everything and nothing is left for their heirs. Add a spinner to see the impact on the retirement fund of changing real interest rates