You plan to begin saving money today to purchase a vacation home on the lake in 25 years. The vacation home you have in mind costs $800,000 today, but you expect that price to go up at the rate of inflation which you expect to be 2% per year. What do you expect its price to be in 25 years? Your annual salary is currently $100,000 per year. You expect your savings (investments) to grow at a rate of 8.0% per year. You expect your annual salary to increase at the rate of inflation. If you want to save the same percentage of your salary every year, what percentage should you save if your first deposit into this vacation home savings account is today and the last deposit is exactly 25 years from today - the same day you plan to buy the home?

Expected price of the vacation home in 25 years __________________

Percentage of your salary you need to save each year __________________