4
Brandon Lewis puts $12,000 per year (at end of year) into an account earning 9% per year for 25 years.
Inflation is expected to be 4% per year. The amount he has in 25 years would only have which of the
following as purchasing power in today's dollars.
a. $572,725
b. $169,127
c. $711,312
d. $381,273
e. $977,318
5
Colin Seely just retired today. He is going to take out a withdrawal of $95,000 today to fund his quest
for extreme sports for 3 years. Then he will make 30 annual unequal withdrawals from his savings with
the first withdrawal occurring at t=3. He wants each withdrawal to have the same purchasing power as
$40,000 has today so the withdrawals need to grow at a constant rate of 3% to compensate for expected
inflation per year. His savings account earns 9% per year. How much needs to be in his savings
account today in order for him to be able to withdraw $95,000 today and make 30 additional
withdrawals (from t=3 through t=32)? Round all calculations to the nearest dollar.
0
1
2
3
31
32
33
-95K
0
0
W1
W29
W30
a. $776,268
b. $600,500
c. $ 595,978
d. $ 405,980
e. $196,260
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