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21 March, 23:08

A retiree wants level consumption in real terms over a 30-year retirement. If the inflation rate equals the interest rate she earns on her $459,000 of savings, how much can she spend in real terms each year over the rest of her life?

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  1. 21 March, 23:30
    0
    Given Information:

    Time period = n = 30 Years

    Amount = P = $459,000

    Inflation rate = interest rate

    Required Information:

    Spending per year = ?

    Answer:

    She can spend $15,300 per year

    Step-by-step explanation:

    Lets assume that interest rate is x

    Real rate = Interest rate - inflation rate

    since it is given that Inflation rate = interest rate

    Real rate = x - x

    Real rate = 0

    Therefore, the retiree can spend

    $459,000/30 = $15,300 per year
  2. 21 March, 23:34
    0
    Real rate = Interest rate - Inflation rate

    Here, real rate will be ZERO.

    When real rate of return os ZERO annual saving will be Value/Years.

    Hence, available real annual savings is $15,300 ($459,000/30)
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