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Your cousin Joe at age 25 wants to plan for his retirement and estimates to retire...

Your cousin Joe at age 25 wants to plan for his retirement and estimates to retire at the age of 65. He already has $5000 in his savings that he received as a gift from his mother. He plans to save some of his income each year during his working years and he plans to increase his savings at a constant 5% each year.

He wants to be able to spend $100.000 for 20 years after his retirement and at the end he wants $300.000 savings to donate his favorite charity. Retirement spending must increase and cover 2% annual inflation as well.

He expects to make 5% return on his savings during working years and 4% after retirement. Assume cash flows occur at the end of the year.

Calculate the saving amount in the first year of working for Joe.

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Expert Solution

ekkarill92 answered 2 years ago
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