Emek is planning to retire in 15 years. She decides to start saving toward building up a retirement fund that pays 8% interest compounded quarterly (the market interest rate). Assume a general inflation rate of 6% per year. If she plans to save by making equal quarterly deposits, what should be the amount of her quarterly deposit (in actual dollars) until she retires so that she can make annual withdrawals of $80,000 in terms of today's dollars over the 20 years following retirement? Assume that she starts withdrawing her money at the end of the first year after retirement.
Emek is planning to retire in 15 years. She decides to start saving toward building up a retirement fund that pays 8% interest compounded quarterly (the market interest rate). Assume a general inflation rate of 6% per year. If she plans to save by making equal quarterly deposits, what should be the amount of her quarterly deposit (in actual dollars) until she retires so that she can make annual withdrawals of $80,000 in terms of today's dollars over the 20 years following retirement? Assume that she starts withdrawing her money at the end of the first year after retirement.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 39P
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