David, age 25, plans to invest $3,000 real dollars per year into his investment account. If the nominal rate of interest is 10% and the rate of inflation is 3%, how much money in nominal dollars will he have at the end of 30 years? Assume that the annual contributions occur at the end of  each year.


2. Mr. Hope, 65, has recently retired. He will spend $45,000 in the first year, and plans to increase his annual spending at the rate of 2% per year. If the rate of interest is 6%, and he does not expect to live beyond age 85, how much money does he need today in order to support his post- retirement expenses? Assume that all annual expenses occur at the beginning of each year.