Question

You wish to receive a pension of EUR 76,000 at the end of each year, starting when are 65 years old. How much do you have to save at the end of each year starting in 1 year, when you are now 39 years old. Your bank offers you a constant interest rate of 11.86 %. You expect a constant annual inflation of 1.16 %.

Retirement years- undefined in the task, we suppose it is a PERPETUITY

Answer 1

Answer:

Given Data:

Expected Pension = EUR 76,000 ,

Nominal Interest Rate = 11.86%,

Inflation Rate = 1.16%

Real Rate of Return = ( 1+NOminal Rate) / (1 + Inflation) - 1,

= [(1+0.1186) / (1+0.0116) ] - 1,

= 10.58%,

Real Rate of Return = 10.58%,

Present Value of Annual WIthdrawal at age 65 = 76,000 / 10.58%,

= 7,18,519.63,

Annual Deposit required = Amount Requiured / Future Value annuity Factor (10.58%,26)

= 7,18,519.63 / 119.65

Annual Deposit Required = 6,005.17 .

***Please give Positive Rating...