Suppose you start saving for retirement when you are 45 years old. You invest $4,000 the first year and increase this amount by 4% each year to match inflation. How much money will you have saved after 20 years if the interest rate earned on the retirement account is 10% per year? (a) You will have saved $219112. (Round to the nearest dollar.) (b) On the other hand, you will have saved $302425 if the rate of increase of the investment deposits was 10% instead of the original 4%.

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter4: Time Value Of Money
Section: Chapter Questions
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Suppose you start saving for retirement when you are 45 years old. You invest $4,000 the first year and
increase this amount by 4% each year to match inflation. How much money will you have saved after 20
years if the interest rate earned on the retirement account is 10% per year?
(a) You will have saved $219112. (Round to the nearest dollar.)
(b) On the other hand, you will have saved $302425 if the rate of increase of the investment deposits was 10%
instead of the original 4%.
Transcribed Image Text:Suppose you start saving for retirement when you are 45 years old. You invest $4,000 the first year and increase this amount by 4% each year to match inflation. How much money will you have saved after 20 years if the interest rate earned on the retirement account is 10% per year? (a) You will have saved $219112. (Round to the nearest dollar.) (b) On the other hand, you will have saved $302425 if the rate of increase of the investment deposits was 10% instead of the original 4%.
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