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Your father is 50 years old and will retire in 10 years. He expects to live...

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Finance

Your father is 50 years old and will retire in 10 years. He expectsto live for 25 years after he retires, until he is 85. He wants afixed retirement income that has the same purchasing power at thetime he retires as $60,000 has today. (The real value of hisretirement income will decline annually after he retires.) Hisretirement income will begin the day he retires, 10 years fromtoday, at which time he will receive 24 additional annual payments.Annual inflation is expected to be 4%. He currently has $140,000saved, and he expects to earn 7% annually on his savings. The datahas been collected in the Microsoft Excel Online file below. Openthe spreadsheet and perform the required analysis to answer thequestion below.

How much must he save during each of the next 10 years(end-of-year deposits) to meet his retirement goal? Do not roundyour intermediate calculations. Round your answer to the nearestcent.

Answer & Explanation Solved by verified expert
3.6 Ratings (528 Votes)
Money does not have the same value in Time o and Time 1 1000 today has more worth and purchasing power than 1000 after 10 years This is mainly due to inflationary effectHence to maintain the current expenditure levels in future years you need to have a higher principal base Solution Input Data Current Age 50 Years Input Data    See Answer
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