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Problem 4 Mr. Adrian Ernest Kouazien is 25 years of age today and his salary next year will be $48,000. Mr. Adrian forecasts that his
Problem 4 Mr. Adrian Ernest Kouazien is 25 years of age today and his salary next year will be $48,000. Mr. Adrian forecasts that his salary will increase at a steady rate of 11% per annum for the next 10 years (i.e., until he turns 35), after that at a rate of 5% during the following 20 years (i.e., until he turns 55), finally at a rate of 2% after that until his retirement at age 60. We assume here that Mr. Adrian pays no income tax. (a) If the discount rate is 8.2%, what is the present value of these future salary pay- ments? (b) Mr. Adrian plans to save 10% his income every year. How much money would he have in hand when he turns 60. (c) Mr. Adrian plans to spend this money over 20 years in equal yearly payment after his retires. How much money would he have available each year for 20 years? (g) Given that Mr. Adrian gets paid in reality every month in equal installments, his financial advisor has advised him to save instead 10% of his monthly income every month. How much money would he have available each year for 20 years
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