You need to earn 5% annual real rate of return and, in addition you need...
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You need to earn 5% annual real rate of return and, in addition 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 4th deposit, the expected annual inflation rate for the next 3 years is 4% per year. To keep your investment goal of 5% real annual return and keeping up with the inflation rate, how much more each year you will need to deposite in addition to the $20,000 per year to reach that goal?
Please show all steps. Thanks.
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