Case 2: By the end of each year, you contribute an equal amount of $3,300 per year...

70.2K

Verified Solution

Question

Finance

Case 2:
By the end of each year, you contribute an equal amount of$3,300 per year to your retirement fund portfolio, which earns anannual nominal return of 11.25% averagely in the long term. Theannual contribution continues for 36 years until you retire. (Note:All tax concerns are ignored.)
(c) This time, considering the long-term annual inflationaverages 3.05%. By your retirement, how much real money (atdeflated real purchasing power) will you actually have in theaccount? How much equal amount (also at deflated real purchasingpower) should you withdraw and spend by the end of each year foryour retirement life, provided that you do not plan to leave anymoney to your heirs?
(d) Again, consider the long-term annual inflation 3.05%. Byyour retirement, how much real money (at deflated real purchasingpower) will you actually have in the account? How much equal amountshould you and your heirs withdraw and spend (at deflated realpurchasing power) by the end of each year, provided that you planto allow both you and your heirs to benefit from this fund,generations after generations infinitely?

Answer & Explanation Solved by verified expert

4.0 Ratings (698 Votes)

Real interest rate Nominal interest rate InflationrateInflation rate is rate See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Case 2:By the end of each year, you contribute an equal amount of$3,300 per year to your retirement fund portfolio, which earns anannual nominal return of 11.25% averagely in the long term. Theannual contribution continues for 36 years until you retire. (Note:All tax concerns are ignored.)(c) This time, considering the long-term annual inflationaverages 3.05%. By your retirement, how much real money (atdeflated real purchasing power) will you actually have in theaccount? How much equal amount (also at deflated real purchasingpower) should you withdraw and spend by the end of each year foryour retirement life, provided that you do not plan to leave anymoney to your heirs?(d) Again, consider the long-term annual inflation 3.05%. Byyour retirement, how much real money (at deflated real purchasingpower) will you actually have in the account? How much equal amountshould you and your heirs withdraw and spend (at deflated realpurchasing power) by the end of each year, provided that you planto allow both you and your heirs to benefit from this fund,generations after generations infinitely?