You are going to make 40 annual contributions starting today to an ordinary 401k plan.

It is 1/1/2017. You are going to make 40 annual contributions, starting today, to an ordinary 401k plan You anticipate your average ordinary tax rate when you make these contributions will be 35% You anticipate your tax rate when you withdraw your investment at the end of the year of 40 years will be 25% You want to have $2,000,000 in inflation adjusted \"purchasing power\" when you withdraw all of the money in your 401k in 40 years and pay all taxes due. a. Note: Purchasing power reflects your ability to purchase goods and services for a given unit of currency. The purchasing power of a unit of currency generally changes over time. For example, if you have $1 buried in your backyard and inflation is 2% in the next year, the $1 in your backyard will have a purchasing power of $1/1.02=$.980392 in today's dollars. b. The following relation is true: (1+inflation rate) * (1+ real rate) = (1+nominal rate) You anticipate earning a nominal rate of return of 5% during the year your money is invested and an inflation rate of 3%. a. What is your annual real rate of return? _______________% What constant annual investment in pretax dollars do you have to make on 1/1 each year, starting on 1/1/2017, to meet your goal