1. Mike is 30 years old and his salary next year will be $40,000. Mike forecasts that his salary will increase at a steady rate of 5% per annum until his retirement at age 60.

a) If the discount rate is 8%, what is the present value of these future salary payments?

b) If Mike saves 5% of his salary each year and invest these saving at an interest rate of 8%, how much will he have by age 60?

c) If Mike plans to spend these saving in even amounts over the subsequent 20 years, how much can he spend each year?