Homework: 6-3 MyFinanceLab: Assignment: Module Six Homew Save Score: 0 of 1 pt 3
ID: 2801536 • Letter: H
Question
Homework: 6-3 MyFinanceLab: Assignment: Module Six Homew Save Score: 0 of 1 pt 3 of 7 (7 complete) HW Score: 67.86%, 4.75 of 7 pts Problem 15-8 (similar to) Peter and Blaireceneened nt that Peler and Blair must save Question Help Peter and Blair recently reviewed their future retirement income and expense projections. They hope to retire in 34 years and anticipate they will need funding for an additional 25 years. They determined that they would have a retirement income of $71,000 in today's dollars, but they would actually need $97,514 in retirement income to meet all of their objectives. Calculate the total amount that Peter and Blair must save if they wish to completely fund their income shortfall, assuming a 2 percent inflation rate and a return of 8 percent. Click on the table icon to view the FVIF table Click on the table icon to view the P IFA table hck on theable on to view the The total amount that Peter and Blair must save if they wish to completely fund their income shortfall, assuming a 2 percent inflation rate and a return of 8 percent is S. (Round to the nearest cent.)Explanation / Answer
Additional income needed per year = 97,514 - 71,000 = $26,514
Real return = 8% - 2% = 6%
Amount they need at retirement can be calculated using PV function
N = 25, I/Y = 6%, PMT = 26,514, FV = 0 => Compute PV = $338,937.91
is the total amount they would need in today's dollar at retirement to completely fund their income shortfall.
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