Suppose that the rate of inflation over the next 60 years will be 3%, the rate o

Question

Suppose that the rate of inflation over the next 60 years will be 3%, the rate of your income growth will be 4% over the next 30 years, and the rate of your investments will also be 4%. Assume continuous growth of salary, savings, etc.

a. If your first job pays $40K/year, what will be your annual salary after 30 years?

b. How much will you make in total over 30 years?

c. Suppose that when you retire in 30 years, you want to have half your salary (at that time) available for 30 more years. How much total investments should you have at the time you retire?

d. How much should you save every year on order to have the proper amount invested when you retire?

Explanation / Answer

rate of growth of income = 4/100 * 40000

= 1600 dollars

so salary = 40000+1600

= 41600 dollars

b)total after thirty years = salary - inflation - investments

= 41600 * 30 - 30 * 3/100 * 41600 - 4/100* 30 * 41600

= 0.93 * 41600 * 30

= 1160640 dollars

d) it changes according to inflation and salary and previous investments

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