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Calculating future value of savings and its worth today

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You have been asked to assist your friends with some personal financial planning. Following their current budget they find they are able to save approximately $10,000 per year. They expect their investments to grow at a nominal rate of 8% and you expect inflation to remain at approximately 4% per year. Your friends expect to retire in 30 years.

a. How much money will they have available at their retirement date?
b. What will that amount be worth in today's dollars?

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Solution Summary

Solution describes the steps for calculating future value of savings at the given interest rate. It also calulates its worth in present value of dollars.

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Please refer attached file for complete solution. Formulas typed with the help of equation writer may be missing here.

Solution:
a. How much money will they have available ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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