With inflation rate of 6%

$600,000 after 40 years will be

Let M be each instalment.

At the end of 40 yr, total amount will be

Equating these two, we get,M=5090.47

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- June 19th 2009, 01:22 AM #1

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## No one can seem to help on this problem... :(

Hey all, have a test tomorrow and she said a problem similar to this will be on it. All help appreciated.

On her 23rd birthday, an engineer decides to put away money. The fund pays 8% interest, compounded quarterly. She feels that $600,000 worth of purchasing power in todays dollars will be enough to pay her bills, after her 63rd birthday. Assume a general inflation rate of 6% per year.

A) If she makes 160 equal quarterly deposits, what should the amount of each of these payments be-in actual dollars?

B) If she plans to save by making end of the year deposits, increasing by $1000 over each subsequent year, how much is her first deposit, in actual dollars?

- June 19th 2009, 03:32 AM #2

- June 19th 2009, 02:47 PM #3

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