Mr. Kabir (husband) and Shafina (wife) calculate their current living expenditures to be RM96,000 a year. During retirement they plan to go for a holiday trip annually on cruise that will cost RM5,000 in todays currency. Shafina estimated that their annual benefits from retirement plan A and Plan B to be about RM17,000 and RM50,000 respectively.

a) How much income, in todays currency, will Mr. Kabir and Shafina need in retirement, assuming replacement ratio for current living expenditure is 70 per cent and an additional RM5,000 for the cruise? (5 marks)

b) Calculate the shortfall in todays currency and determine how much the shortfall will be in 30 years assuming it grows at the 3.5 percent rate of inflation. (10 marks)

c) Determine, in RM, how much they need to have saved if they wish to withdraw to cover the shortfall, assuming they earn an inflation adjusted rate of 6 per cent (that is, 9.5% - 3.5%) per year on their Investment (30-year annuity). (10 marks)