You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,700 per month in a stock account in real dollars and $595 per month in a bond account in real dollars. The effective annual return of the stock account is expected to be 12 percent, and the bond account will earn 8 percent. When you retire, you will combine your money into an account with an effective return of 9 percent. The returns are stated in nominal terms. The inflation rate over this period is expected to be 4 percent. a. How much can you withdraw each month from your account in real terms assuming a 25-year withdrawal period? b. What is the nominal dollar amount of your last withdrawal?
You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,700 per month in a stock account in real dollars and $595 per month in a bond account in real dollars. The effective annual return of the stock account is expected to be 12 percent, and the bond account will earn 8 percent. When you retire, you will combine your money into an account with an effective return of 9 percent. The returns are stated in nominal terms. The inflation rate over this period is expected to be 4 percent. a. How much can you withdraw each month from your account in real terms assuming a 25-year withdrawal period? b. What is the nominal dollar amount of your last withdrawal?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 3PB: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...
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You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,700 per month in a stock account in real dollars and $595 per month in a bond account in real dollars. The effective annual return of the stock account is expected to be 12 percent, and the bond account will earn 8 percent. When you retire, you will combine your money into an account with an effective return of 9 percent. The returns are stated in nominal terms. The inflation rate over this period is expected to be 4 percent. |
a. |
How much can you withdraw each month from your account in real terms assuming a 25-year withdrawal period? |
b. | What is the nominal dollar amount of your last withdrawal? |
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