Question/Problem:

Hint: The way of thinking for Ex. 2-33 should be

1) With 5% annual Inflation, you actually need $??? at the end of year 10 alone to keep your real purchasing power of today's $40K value.

2) If you need $??? at Year 10 and the similar annual amount for the remaining retirement years, how much will all those post-retirement annuity be worth in total at Year 10, according to your investment growth plan?

3) You already begin with an upfront contribution investment $100,000 at Year 0. Besides that, how much extra money you need to invest by the end of each year to make sure you will have the total amount as Part 2) requires at Year 10 when you retire?

-Will need to put this excel using: PV, FV, PMT, NPER and rate. ( Excel Calculations)

Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires, that is, until he is 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $40,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment (do not let the retirement payments grow with inflation: he realizes that the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then get 24 additional annual payments. Inflation is expected to be 5% per year from today forward; he currently has $100,000 saved up; and he expects to earn a return on his savings of 8% per year, annual com- pounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year) to meet his retirement goal? (Hint: Neither the amount he saves nor the amount he withdraws upon retirement is a growing annuity.)