In: Finance
You want to have $2.5 million in real dollars in an account when you retire in 40 years. The nominal return on your investment is 10.3 percent and the inflation rate is 3.7 percent. |
What real amount must you deposit each year to achieve your goal? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Real rate=(1+nominal rate)/(1+inflation rate)-1
=(1+0.103)/(1+0.037)-1
=(1.103/1.037)-1
0.06364513(Approx)
Future value of annuity=Annuity[(1+rate)^time period-1]/rate
2,500,000=Annuity[(1+0.06364513)^40-1]/0.06364513
2,500,000=Annuity*169.6858857
Annuity=2,500,000/169.6858857
which is equal to
=$14733.11(Approx).