Emily figures she needs $650,000 in her 401(k) account to retire comfortably 32 years from now. She realizes that it is not $650,000 actual dollars that she wants, but rather $650,000 in today's dollars. Suppose that inflation averages 3.25% annually in the future, and that Emily's investments will earn an average 9.25% annual rate of return. She has nothing in her 401(k) account today.

a. Calculate the amount that Emily should deposit from each of her biweekly paychecks to reach this goal. Assume that she plans to contribute the exact same dollar amount from each paycheck from now until retirement.

b. Calculate the amount that Emily should deposit from each of her biweekly paychecks to reach this goal. Assume that she plans to increase her payments by 4.5% each year

c. Calculate the amount that Emily should deposit from each of her biweekly paychecks to reach this goal. Assume that she plans to increase her payments over the years to keep up with inflation.

d. What real rate of return are we assuming for Emily's retirement account?

Answer rating: 100% (QA)

a To calculate the amount Emily should deposit from each of her biweekly paychecks to reach her goal of 650000 in todays dollars we can use the presen... View the full answer