You would like to have enough money saved after your retirement such that you and your heirs can receive $100,000 per year in perpetuity. How much would you need to have saved at the time of your retirement in order to achieve this goal? (Assume that the perpetuity payments start one year after the date of your retirement. The annual interest rate is 12.5 percent.)
Added by Dawn B.
Step 1
Step 1: Calculate the annual interest rate as a decimal. Show more…
Show all steps
Your feedback will help us improve your experience
Nick Johnson and 92 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
You want to save sufficient funds to generate an annual cash flow of $55,000 a year for 25 years as retirement income. You currently have no retirement savings but plan to save an equal amount each year for the next 38 years until your retirement. How much do you need to save each year if you can earn 7.5 percent on your savings?
Eduard S.
Assume your goal in life is to retire with $2,500,000. How much would you need to save at the end of each year if interest rates average 7% and you have a 20-year work life?
Haricharan G.
You want to be able to withdraw $25,000 from your account each year for 15 years after you retire. You expect to retire in 20 years. If your account earns 10% interest, how much will you need to deposit each year until retirement to achieve your retirement goals?
Sai S.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD