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You want to have $1.2 million in real dollars in an account when you retire in...

You want to have $1.2 million in real dollars in an account when you retire in 35 years. The nominal return on your investment is 8 percent and the inflation rate is 3.0 percent. What is the real amount you must deposit each year to achieve your goal?

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Answer #1

Future Value = 1,200,000

Nominal Rate = 8%

n = 35 years

Future Value =

where r is the rate of Return for compounding period = 8%

n is the no of compounding period 35

1,200,000 =

1,200,000 =

Periodic Payment = 1,200,000 / 172.316803671

Periodic Payment = $ 6963.92

He needs to deposit 6963.92 every year to get 1.2 Mn $

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