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 3.03% (nominal) and thus will increase her savings at the same rate. Her savings will earn an annual return of 6.06% (nominal). Use the above information to answer questions (A)-(C). What should be Amy's first deposit to achieve her goal for the retirement savings account?
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 3.03% (nominal) and thus will increase her savings at the same rate. Her savings will earn an annual return of 6.06% (nominal). Use the above information to answer questions (A)-(C). What should be Amy's first deposit to achieve her goal for the retirement savings account?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 10P
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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 3.03% (nominal) and thus will increase her savings at the same rate. Her savings will earn an annual return of 6.06% (nominal). Use the above information to answer questions (A)-(C). What should be Amy's first deposit to achieve her goal for the retirement savings account?
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