A couple will retire in 50 years; they plan to spend about $35,000 a year in retirement, which should last about 25 years. They believe that they can earn 9% interest on retirement savings. 1) If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. b) How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $65 000 on their child’s college education?
A couple will retire in 50 years; they plan to spend about $35,000 a year in retirement, which should last about 25 years. They believe that they can earn 9% interest on retirement savings. 1) If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. b) How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $65 000 on their child’s college education?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A couple will retire in 50 years; they plan to spend about $35,000 a year in retirement, which should last about 25 years. They believe that they can earn 9% interest on retirement savings.
1) If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year.
b) How would the answer to part (a) change if the couple also realize that in 20 years they will need to spend $65 000 on their child’s college education?
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