Bill retires and invests $300,000 at 7 percent, earning $21,000 a year. If inflation is 3 percent,
Question:
Bill retires and invests $300,000 at 7 percent, earning $21,000 a year.
If inflation is 3 percent, what is Bill’s real rate of return? If Bill consumes all $21,000 each year, what will happen to the real value of his investment and his income? How might he have prevented this?
(Assume he can earn 7 percent on any added investments.)
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The real rate of return is 4 percent 7 percent 3 percent If Bill consumes 2100...View the full answer
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