Question
John is planning to retire in 15years. He decides to start saving toward building up a retirement fund that pays 8% interest compounded quarterly (the
John is planning to retire in 15years. He decides to start saving toward building up a retirement fund that pays 8% interest compounded quarterly (the market interest rate). Assume a general inflation rate of 6% per year. If he plans to save by making equal quarterly deposits, what should be the amount of his quarterly deposit (in actual dollars) until he retires so that he can make annual withdrawals of $80,000 in terms of today's dollars over the 20 years following retirement? Assume that he starts withdrawing his money at the end of the first year after retirement.
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