Upon their retirement, your clients will roll over their nest egg, i.e., your answer for Q3(7,500,000), into a conservative account that is expected to generate an annual rate of return of 6.6%, compounded monthly. Their retirement needs are expected to be 85% of their salary right before their retirement, and are subject to monthly inflation at an annual rate of 3%. Their combined social security benefits will cover 22% of their retirement needs, and their pension benefits will cover another 8%. Your clients need to withdraw from this conservative account at the beginning of each month in order to meet the monthly expenses during their combined retirement horizon of 23 years.

Determine (with precise explanation) the cash flows pattern of the monthly withdrawals from the conservative account; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER (select the correct choice), used in your analysis. Will your clients be able to leave an inheritance at the end of their retirement horizon? If so, calculate the size of the inheritance. If your clients are not able to leave an inheritance, at what age will they run out of money during their retirement? Support your answer numerically. Verify your work on the retirement needs and hence the inheritance with the formula approach!