Each year, for the next 40 years, you will deposit an equal sum of money into...
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Each year, for the next 40 years, you will deposit an equal sum of money into a fund that pays 12% interest, to help pay for 25 years of retirement expenses. Starting 40 years from now (at the end of the 40th period), you will make a lump- sum withdrawal in constant 2021 dollars = $500,000. This will be followed by equal annual withdrawals, in constant %3D 2021 dollars, for 25 years (periods 41 through 65). The amount you will withdraw is $50,000 per year, in constant 2021 dollars. The inflation rate is 3.5%. Use i' with constant dollars to solve part B. Draw a cash flow diagram and show your work. а. Calculate i' b. Draw a cash flow diagram С. Determine how much, in constant 2021 dollars, must you must deposit into the account each year? Each year, for the next 40 years, you will deposit an equal sum of money into a fund that pays 12% interest, to help pay for 25 years of retirement expenses. Starting 40 years from now (at the end of the 40th period), you will make a lump- sum withdrawal in constant 2021 dollars = $500,000. This will be followed by equal annual withdrawals, in constant %3D 2021 dollars, for 25 years (periods 41 through 65). The amount you will withdraw is $50,000 per year, in constant 2021 dollars. The inflation rate is 3.5%. Use i' with constant dollars to solve part B. Draw a cash flow diagram and show your work. а. Calculate i' b. Draw a cash flow diagram С. Determine how much, in constant 2021 dollars, must you must deposit into the account each year?
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a Nominal rate of interest 12 Inflation rate 35 Real rate of interest 1 012 1 0035 1 8... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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