Amy is now (year 0) 25 years old and planning for her retirement at age 65. She would like to have $2 million for her retirement by then. She will make her first deposit in her retirement savings account next year (year 1) and continue until her last deposit at age 65 (year 40). All deposits are made on the last day of the year. Amy expects her income to increase at an annual rate of 3.13% (nominal) and thus will increase her savings at the same rate. Her savings will earn an annual return of 6.93% (nominal). Use the above information to answer questions (A) – (C). Amy's first deposit to achieve her goal for the retirement savings account? answer : 6812.038768 Suppose that inflation is 1.67% per year. a)What would be the real value of Amy's retirement savings account balance when she retires (year 40)?b)Suppose that inflation is 3.13% per year (rather than 1.67% as noted above), and there is no change in Amy's income growth and the return on her savings. What would Amy's first deposit (in nominal terms) have to be in order to achieve the same real value in her retirement savings account balance when she retires?
Amy is now (year 0) 25 years old and planning for her retirement at age 65. She would like to have $2 million for her retirement by then. She will make her first deposit in her retirement savings account next year (year 1) and continue until her last deposit at age 65 (year 40). All deposits are made on the last day of the year. Amy expects her income to increase at an annual rate of 3.13% (nominal) and thus will increase her savings at the same rate. Her savings will earn an annual return of 6.93% (nominal). Use the above information to answer questions (A) – (C). Amy's first deposit to achieve her goal for the retirement savings account? answer : 6812.038768 Suppose that inflation is 1.67% per year. a)What would be the real value of Amy's retirement savings account balance when she retires (year 40)?b)Suppose that inflation is 3.13% per year (rather than 1.67% as noted above), and there is no change in Amy's income growth and the return on her savings. What would Amy's first deposit (in nominal terms) have to be in order to achieve the same real value in her retirement savings account balance when she retires?
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter27: Time Value Of Money (compound)
Section: Chapter Questions
Problem 6E
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Amy is now (year 0) 25 years old and planning for her retirement at age 65. She would like to have $2 million for her retirement by then. She will make her first deposit in her retirement savings account next year (year 1) and continue until her last deposit at age 65 (year 40). All deposits are made on the last day of the year. Amy expects her income to increase at an annual rate of 3.13% (nominal) and thus will increase her savings at the same rate. Her savings will earn an annual return of 6.93% (nominal).
Use the above information to answer questions (A) – (C).
Amy's first deposit to achieve her goal for the retirement savings account?
answer : 6812.038768 Suppose that inflation is 1.67% per year. a)What would be the real value of Amy's retirement savings account balance when she retires (year 40)?b)Suppose that inflation is 3.13% per year (rather than 1.67% as noted above), and there is no change in Amy's income growth and the return on her savings. What would Amy's first deposit (in nominal terms) have to be in order to achieve the same real value in her retirement savings account balance when she retires?
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