Assume that your father is now 50 years old, that he plans toretire in 10 years, and that he
expects to live for 25 years after he retires—that is, until age85. He wants his first retirement
payment to have the same purchasing power at the time he retires as$40,000 has today. He
wants all of his subsequent retirement payments to be equal to hisfirst retirement payment. (Do
not let the retirement payments grow with inflation: Your fatherrealizes that the real value of his
retirement income will decline year by year after he retires.) Hisretirement income will begin the
day he retires, 10 years from today, and he will then receive 24additional annual payments.
Inflation is expected to be 8% per year from today forward. Hecurrently has $100,000 saved up;
and he expects to earn a return on his savings of 10% per year withannual compounding. To the
nearest dollar, how much must he save during each of the next 10years (with equal deposits
being made at the end of each year, beginning a year from today) tomeet his retirement goal?
(Note: Neither the amount he saves nor the amount he withdraws uponretirement is a growing
annuity.)