Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q6) Boris wants to retire and figures that today he could live on $20000 per year. Unfortunately, he is 20 years away from retirement and

Q6)

Boris wants to retire and figures that today he could live on $20000 per year. Unfortunately, he is 20 years away from retirement and inflation is running at 1.50% (effective annual rate).

a) When he retires in 20 years, how much money will he need per year (to be equivalent to $20000 today)?

b) When he retires Boris wants to have savings that are 10 times his annual living costs. Interest rates are 5.0% compounded semi-annually. How much money does he need in his account today to be able to retire in 20 years?

c) Using your answer from b), what is the real rate of return on Boris savings?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investments

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

9th Edition

73530700, 978-0073530703

More Books

Students also viewed these Finance questions