Question

In: Economics

You wish to retire in 30 years. You think that you will need an income $5,000...

You wish to retire in 30 years. You think that you will need an income $5,000 every month from an ordinary                               

          annuity. The current interest rate is 6% (compounded monthly). You wish to receive that payment for 23                

          years after retirement.

  1. What lump sum in 20 years will you require to purchase that annuity.
  2. How much must you contribute monthly starting today to be able to buy that annuity (6% compounded     monthly)
  3. If you estimate the inflation rate will be 4% per year, what would the purchasing power of $5,000 every month   in 30 years be in todays money.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
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