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
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?