Virginia Tech FIN FIN 3134 Congratulations on starting your new business that offers financial…
Congratulations on starting your new business that offers financial advising services for individuals and families. Your first customers are a young couple that plans to work until 2050 when they will retire. Mortality tables suggest that the couple will live until 2080. They expect that when they retire they will need an amount that corresponds to $100,000 per year in todays $’s. After their retirement, they expect to earn a nominal return of 6% and inflation rate of 3% is expected to be constant across their life.
a) How much will they need to have saved at the point in time when they retire?
b) Assume that he will contribute $7,500 per year to their retirement account from now until this time in 2050. His first deposit will occur on this date in 2021, and his return on his investments during this period is expected to be 8%. What is the value of his saving today (i.e., 2020)?
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