Finance retirement consumption

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Question 1: Even though it is too early to think about retirement, you have already decided that you want to accumulate enough by then to provide yourself with £30,000 a year for 15 years after you retire. If the interest rate is 10% how much must you accumulate? (You are asked to calculate the present value of £30000 for 15 years)

Question 2: How much must you save each year until retirement in order to finance your retirement consumption? Important: your retirement is in 30 years, not 15.

Question 3: Now you remember that the annual inflation rate is 4%. You really want to consume $30,000 a year in REAL dollars during retirement and wish to save an equal REAL amount each year until then. In addition, interest rate is now compounded DAILY, not yearly. What is the real amount of savings that you need to accumulate by the time you retire? [Hint: calculate the real interest rate first and then compound daily]

Reference no: EM132428721

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