Question: Problem 4 You need to eam 6% annul real rate of return and, in addtion, you need to keep up with the annual inflation rate.
Problem 4 You need to eam 6% annul real rate of return and, in addtion, you need to keep up with the annual inflation rate. Exactly 4 years ago, the expected inflation rate was 2% per year. At that time, you decided to invest in a 7-year annuity with $20,000 deposited at the end of each year. Now, right after you made the 4 deposit, the expected annual inflation rate for the next 3 years is 3% per year. To keep your investment goal of 6% real annual return and keeping up with the new inflation rate, how much more each year for the last3 years you will need to deposit in addition to the $20,000 per year to reach that goal? Problem 4 You need to eam 6% annul real rate of return and, in addtion, you need to keep up with the annual inflation rate. Exactly 4 years ago, the expected inflation rate was 2% per year. At that time, you decided to invest in a 7-year annuity with $20,000 deposited at the end of each year. Now, right after you made the 4 deposit, the expected annual inflation rate for the next 3 years is 3% per year. To keep your investment goal of 6% real annual return and keeping up with the new inflation rate, how much more each year for the last3 years you will need to deposit in addition to the $20,000 per year to reach that goal
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