Pt. 1 A young engineer has a starting salary of $75,000. If her salary increases

Question

Pt. 1 A young engineer has a starting salary of $75,000. If her salary increases by an average of 4% each year, what will her annual salary be at the end of a 40 year career? (assume 5% annual rate of return)

Pt 2. Â If she deposits 5% of her growing salary into a retirement program each year for her 40 year career, what will the retirement account balance be when she retires? Assume a 5% annual rate of return for the retirement account.

Pt 3. Â If she depletes the account by withdrawing an equal amount each year for the first 20 years of her retirement, what is the amount of the annual withdrawal?

Pt. 4 Â If she would like for the annual withdrawal to increase by 4% each year over the first 20 years of her retirement, what is the amount of the first year withdrawal?

Explanation / Answer

Pt. 1

Salary will increase by 4% every year, so all you have to do is find F given P

Annual Salary at the end of 40 yrs=$75,000(F/P,4%,40)=$360,750

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