Li is amazed that he will be able to accumulate over $600,000. However, he knows that inflation will increase his cost of living significantly in 30 years. He assumes 3% inflation and wants to find the income he needs at age 67 to have the same purchasing power as $40,000 today. (Hint: Look at inflation in Section 10.2 and use the compound interest table in Section 10.1.

Li is amazed that he will be able to accumulate over $600,000. However, he knows that inflation will increase his cost of living significantly in 30 years. He assumes 3% inflation and wants to find the income he needs at age 67 to have the same purchasing power as $40,000 today. (Hint: Look at inflation in Section 10.2 and use the compound interest table in Section 10.1.

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 8E

See similar textbooks

Similar questions

Assume that you want to retire 30 years from now with an amount of money that will have the same value (purchasing power) as $3 million today. If you believe the inflation rate will average 4.8% per year, determine the amount of future dollars you will need. The amount of future dollars you will need is $ . (Enter your answer in dollars and not in millions of dollars.)
Consider the following statement: "If you are 20 years of age and save $1.00 each day for the rest of your life, you can become a millionaire." Assume that you live to age 80 and that the annual interest rate is 12%. Under these specific conditions, we compute the future compound amount (F): $2,727,149. If inflation is expected to average 3% per year over the next 60 years, your purchasing power will be less than $2,727,149. a. When f= 3% per year, what is the purchasing power of this future sum of money in today's dollars when you reach age 80? b. Repeat Part (a) when inflation averages 1% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 1% per year. Click the icon to view the interest and annuity table for discrete compounding when /=3% per year. a. The purchasing power is $ thousand. (Round to the nearest whole number.) b. The purchasing power is $ thousand. (Round to the nearest whole number.)
You estimate that by the time you retire in 35 years, you will have accumulated savings of $3.5 million. a. If the interest rate is 10.0% and you live 15 years after retirement, what annual level of expenditure will those savings support? (Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places.) b. Unfortunately, inflation will eat into the value of your retirement income. Assume a 6% inflation rate and work out a spending program for your $3.5 million in retirement savings that will allow you to increase your expenditure in line with inflation. What will be your expenditure amount in real terms for each year of your retirement? (Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places.) Can you Please Answer Part B?
Imagine that the interest rate on your savings account is positive and there is no inflation rate. Assume you inherit ₱10,000 today and you deposit it into a savings account and your friend inherits ₱10,000 3 years from now. Who is richer because of the inheritance? A. I amB. My friendC. They are equally rich
To live comfortably in retirement, you decide you will need to save $2 million by the time you are 65 (you are 30 years old today). You will start a new retirement savings account today and contribute the same amount of money on every birthday up to and including your 65th birthday. Using TVM principles, how much must you set aside each year to make sure that you hit your target goal if the interest rate is 5%? What flaws might exist in your calculations, and what variables could lead to different outcomes? What actions could you take ensure you reach your target goal?
A woman desires to have $400,000 in a savings account when she retires in 20 years. Because of the effects of inflation on spending power, she stipulates that her future “nest egg” will be equivalent to $400,000 in today’s purchasing power. If the expected average inflation rate is 7% per year and the savings account earns 5% per year, what lump-sum amount of money should the woman deposit now in her savings account?
You estimate that by the time you retire in 35 years, you will have accumulated savings of $3.2 million. a. If the interest rate is 8.0% and you live 15 years after retirement, what annual level of expenditure will those savings support? Note: Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places. b. Unfortunately, inflation will eat into the value of your retirement income. Assume a 3% inflation rate and work out a spending program for your $3.2 million in retirement savings that will allow you to increase your expenditure in line with inflation. What will be your expenditure amount in real terms for each year of your retirement? Note: Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places. a. Annual expenditure b. Real annual expenditure
The Smiths save $12,000 per year for retirement. They are now in their mid-twenties, and they expect to have $1 million in today's dollars saved by the time they're in their mid-sixties. If their market interest rate is 5% per year, inflation averages 3% a year, and they save for 40 years, is their financial plan possible? Click the icon to view the interest and annuity table for discrete compounding when i= 5% per year. Click the icon toew the interest and annuity table for discrete compounding when i= 3% per year. GCDO The purchasing power in today's dollars of the Smiths' savings is $ thousand. (Round to two decimal places.)
Using the formula: Oshri is planning on his retirement, so he is setting up a payout annuity with his bank. He is now 30 years old, and he will retire when he's 60. He wants to receive annual payouts for 25 years, and he wants those payouts to receive an annual COLA of 3.5%. A. He wants his first payout to have the same purchasing power as does $13,000 today. How big should that payout be if he assumes inflation of 3.5% per year?
K You are saving for retirement. To live comfortably, you decide you will need to save $1 million by the time you are 65. Today is your 21st birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 9%, how much must you set aside each year to make sure that you will have $1 million in the account on your 65th birthday? The amount to deposit each year is $(Round to the nearest dollar)
Ryan is 30 years old and wants to save $2 million for retirement in 30 years. Assume he invests in a savings account that earns at least the current rate of inflation (7.2%). Determine how much money Ryan must save based on the number of years that he waits to start saving to reach his retirement goal. Years of Waiting to Save Principal Required 0 10 20 30 $2,000,000
Bhupatbhai