What is the real value of that rrsp balance

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Reference no: EM132535052

Mahmoud Hassan will earn $50,000 this year. At the end of this year and subsequent years his salary will increase by 3%. Each year-end he deposits 18% of his salary into an RRSP. After 10 years he will get a promotion and his salary will increase by 20% for the next year, on top of the 3% automatic increase. For 10 years he will continue to get the 3% increase each year. He will still save 18% of his salary each year into an RRSP. He will earn 5% p.a. on the RRSP investments.

Question a) How much will he have in his RRSP after 20 years?

Step 1: Calculate FV OF RRSP AT 10 YEARS FISRT

Question b) If the inflation rate is 2% p.a. for every year, what is the real value of that RRSP balance, in today's dollars?

Reference no: EM132535052

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