Suppose that the rate of inflation over the next 60 years will be 3%, the rate o

Question

Suppose that the rate of inflation over the next 60 years will be 3%, the rate of your income growth will be 4% over the next 30 years, and the rate of your investments will also be 4%. Assume continuous growth of salary, savings, etc.

a. If your first job pays $40K/year, how much will you make in 30 years?

b.How much will you make in total over 30 years?

c. Suppose that when you retire in 30 years, you want to have half your salary (at that time) available for 30 more years. How much you have invested at the time you retire?

d. How much should you save every year on order to have the proper amount invest when you retire?

Redo the problem above assuming a pay raise once a year and deposits and withdraws accrue yearly, monthly, and daily rather than continuously.

Explanation / Answer

Hi there!

Please see the below link to find the time money relationship for this discrete compound problem.

It has all the related topics and solved expample. I believe in the self support. I hope after reading this you will be able to find your answers.

1. http://www.aw.com/info/klein/Chapter3.pdf

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