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A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8% nominal interest on retirement savings, and the couple realizes that the annual inflation rate is 4%.
a. If one pound of apples costs $1 today, how much will they cost by the time they retire?
b. The couple really wants to consume $30,000 a year in real dollars during retirement. What is the real amount of saving they need to accumulate by the time they retire?
c. How much will they have to save each year for the next 50 years, in real dollars, to reach their retirement goal?
d. How long does it take for the couple to triple their salary in real dollars?
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Are there any slack values? Are there any surplus values? What are the extreme points of the feasible region?
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