Make annual payments into a savings plan-retirement savings

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A couple will retire in 40 years; they plan to spend about $27,000 a year in retirement, which should last about 20 years. They believe that they can earn 7% interest 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. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Annual payment $

b. How would the answer to part (a) change if the couple also realize that in 15 years they will need to spend $57,000 on their child’s college education? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Annual payment $

Reference no: EM131011676

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