You want to retire in 30 years. You put aside $250 a week starting now. You...
You want to retire in 30 years. You put aside $250 a week starting now. You also have $50000 in your 401k now. If the average inflation rate is 2.5% and your 401k grows steadily at an annual rate of 6%; how much will your 401k be worth in today’s dollar?
Homework Answers
Real rate of return = Nominal rate - Inflation = 6% - 2.5% = 3.5%
Value of 401k after 30 years can be calculated using FV function
N = 30 x 52 = 1,560, PMT = 250, PV = 50,000, I/Y = 3.5%/52
=> Compute FV = $832,441.97
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