A couple will retire in 40 years; they plan to spend about $21,000 a year (in current dollars) in retirement, which should last about 20 years. They believe that they can earn a real interest rate of 7% on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Annual savings b. How would the answer to part (a) change if the couple also realize that in 15 years they will need to spend $51,000 on their child's college education? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

A couple will retire in 40 years; they plan to spend about $21,000 a year (in current dollars) in retirement, which should last about 20 years. They believe that they can earn a real interest rate of 7% on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Annual savings b. How would the answer to part (a) change if the couple also realize that in 15 years they will need to spend $51,000 on their child's college education? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8EA: You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how...

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