PROBLEM 5. Draw a cash flow diagram and solve the following:

A 65 years old engr began planning for retirement 40 years ago. Assume the inflation rate over the 40-year time period average a constant 4% per year.

(a) What is the constant-value purchasing power of his $1 million at age 65?

(b) How many future dollars should he have accumulated over the 40 years to have a CV purchasing power equal to $1 million at his current age of 65?