Suppose you have 25 years until you retire, and that you desirea retirement nest-egg of $2,500,000 on the day you retire. Supposealso that you’ve saved $100,000 toward your retirement so far, andthat your investment account earns a nominal rate of 7.5% per year,compounded monthly. In addition, suppose you expect a windfallinheritance of $200,000 five years from now that you will invest inthis account.
a) What is the effective interest rate, or annual percentageyield, of your investment account?
b) How much money should you deposit into that account everyyear in order to reach your goal?
