Ms. Miller is 25 years of age as of today. She wants to retire at age 65 and wants to save equal amounts annually over next forty years so that she can have annual income of $80,000 from the accumulated funds from her annual savings over her retirement age from age 65 to age 95. Her savings will start when she will be of age 26 and her first retirement income will be made from the accumulated funds when she will be age 66.

 Suppose that she will earn on her savings annual interest rate of 6%, compounded annually, throughout the time horizon, find her equal annual saving during her working life

Consider the same data as in Question above. Assume that, with prices of goods and services at date zero as the base, the expected annual rate of inflation of 1.0% throughout the time horizon. Suppose that she will like to have annual real income (or income in real terms) of $80,000 during her retirement age of 65-95 years. Answer the following questions:

 (i)                Find the equal annual real saving during her working life.

(ii)              Calculate the present value of the equal annual real savings over forty years of working life?

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i To find the equal annual real saving during her working life we need to consider the effect of inf... View the full answer