Calculate the required preretirement real annual savings

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a. You plan to retire in 30 years and want to accumulate enough by then to have $30,000 peryear for 15 years. If the interest rate is 10%, how much must you accumulate by the timeyou retire?

b. How much must you save each year until retirement in order to finance your retirementconsumption?

c. You remember that the expected annual inflation rate is 4%. If a loaf of bread costs $1today, what will it cost by the time you retire?

d. You really want to consume $30,000 a year in real dollars during retirement and wish tosave an equal real amount each year until then. What is the real amount of savings thatyou need to accumulate by the time you retire?

e. Calculate the required preretirement real annual savings necessary to meet yourconsumption goals. Compare your answer to part (b). Why is there a difference?

f. What is the nominal value of the amount you need to save during the first year? (Assumethe savings are put aside at the end of each year.) The 30th year?

Reference no: EM133121292

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