Arizona State University FIN FIN 40628 Please show your work Problem 1 Consider the following timeline…
Assume that you are 30 years old today and that you are planning on retirement at age 65. Your current salary
is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your
retirement, you plan on making annual contributions to a retirement account. Your first contribution will be
made on your 31st birthday and will be 8% of this year’s salary. Likewise, you expect to deposit 8% of your
salary each year until you reach age 65. Assume that the rate of interest is 7%.
a. The present value (at age 30) of your retirement savings is closest to:
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