5) Jeremy would like to retire in 25 years. He would like his retirement income...
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5) Jeremy would like to retire in 25 years. He would like his retirement income to be $250,000, and this figure should grow at the same rate as inflation, expected to be 2 percent annually. He expects to live 30 years after he retires, and plans to leave $3 million to WSU after he dies. 2 Jeremy currently has $1,000,000 in his retirement fund. The fund is expected to earn 6 percent annually. Assuming that Jeremy increases his annual retirement savings by 2 percent per year (the inflation rate), how much must he save this year in order to have enough funds for his retirement goals? HINTS: Both Jeremys retirement income AND his annual retirement savings are growing annuities (each at the 2 percent inflation rate). Also, you may assume that all payments are made or received at the end of each year, so that they are ordinary growing annuities.
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