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Assume you are now 21 years old and will start working as soon as you graduate...

Assume you are now 21 years old and will start working as soon as you graduate from college. You plan to start saving for your retirement on your 25thbirthday and retire on your 65thbirthday. After retirement, you expect to live at least until you are 85. You wish to be able to withdraw $40,000 (in today’s dollars) every year from the time of your retirement until you are 85 years old (i.e., for 20 years). The average inflation rate is likely to be 5 percent.

a.) Calculate the future value of $40,000 that you will need when you're 65 years old, assuming a 5% rate of inflation, 45 years from now.

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