Reference no: EM132894500
Suppose you think if you were to retire right now you would have needed $50,000 each year to supplement your social security and maintain your desired lifestyle. But because there is on average 3% annual inflation, when you retire in 30 years from now you need more than $50,000 per year to maintain the lifestyle you like.
Question 1: How much will be equivalent to $50,000 at the retirement time when adjusted for inflation?
Question 2: How much will be the face value of the bond that yields the equivalent of $50,000, found in #4 of Part B in coupon payment?
Question 3: How much annual payment in the retirement account is needed to accumulate the amount needed to purchase the bond when retiring?
Question 4: What is the purchase power of the amount that will be received by your inheritors, measured in the current value of $ at the time of opening the retirement account?
(Hint: First calculate what future amount in 30 years, which is equivalent to $50,000 of now and then solve the rest of the problem).