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You want to have $5 million in real dollars in an account when you retire in 20 years.
The nominal return on your investment is 10 percent and the inflation rate is 3 percent.
What is the real amount you must deposit each year to achieve your goal?

Respuesta :

anthougo

Answer:

The real amount that you must deposit each year to achieve your goal is:

= $54,662.78.

Explanation:

a) Data and Calculations:

Required amount in real dollars = $5 million

Nominal return on investment = 10%

Inflation rate = 3%

Real return on investment = 13% (10 + 3)

From an online financial calculator:

N (# of periods)  20

I/Y (Interest per year)  13

PV (Present Value)  0

FV (Future Value)  5000000

Results

PMT = $54,662.78

Sum of all periodic payments $1,093,255.61

Total Interest $3,906,744.3

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