Consider Brad’s goal to retire in 25 years by saving $ 4,000 per year starting 5 years from now. a. Based on your analysis of Brad’s cash flow and your recommendations, is saving $ 4,000 per year a realistic goal? If not, what other goal would you advise?
b. In order for Brad to know what his $ 4,000 per year will accumulate to in 25 years, what additional assumption ( or piece of information) must he make ( or have)?
c. Assuming that Brad invests the $ 4,000 per year for 20 years, starting 5 years from now and achieves a return of 8% per year, how much will he accumulate in 25 years?
d. Compare the alternative of investing $ 4,000 every year for 25 years beginning today with Brad’s plan to invest $ 4,000 every year for 20 years beginning 5 years from now. How much additional funds will Brad have to save each year to accumulate the same amount that he would have in 25 years if he started saving now instead of 5 years from now? (Again, assume an 8% annual return.)

  • CreatedOctober 13, 2015
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