Asked by VicG
You want to have $2million in real dollars in an account when you retire in 43 years. The nominal return on your investment in 9.939% and the inflation rate is 3.2%. What is the real amount you must deposit each year to achieve this goal?
Answers
Answered by
Daniel
The first thing to do is to use the fisher rule, which implies:
(1+R)= (1+r)*(1+h); h being inflation.
So, (1+0.09939)= (1+r)* (1+0.032)
(1+r)= (1.09939)/(1.032)
r= 1- 1.0653= 6.53%
Take you Financial calculator and put the following order:
I/Y= 6.53
N=43
FV= 2,000,000
PV=0
CPT+PMT= 9,209.68
(1+R)= (1+r)*(1+h); h being inflation.
So, (1+0.09939)= (1+r)* (1+0.032)
(1+r)= (1.09939)/(1.032)
r= 1- 1.0653= 6.53%
Take you Financial calculator and put the following order:
I/Y= 6.53
N=43
FV= 2,000,000
PV=0
CPT+PMT= 9,209.68