Answer:
Bowie will require saving for $1,101,832.05 to achieve their goal.
Explanation:
He expect to have wages 800% of what he currently owns:
60,000 x 80% = 48,000
Now, this will increase 3% per year for inflation reasons:
[tex]Principal \: (1+ r)^{time} = Amount[/tex]
Principal 48,000.00
time 10.00
rate 0.03000
[tex]48000 \: (1+ 0.03)^{10} = Amount[/tex]
Amount 64,507.99
Now, we solve for the present value of an annuity of 33 year (95 - 62) with a real rate according to Irwin method of:
[tex]\frac{1+r_n}{1+\theta } -1 = r_r[/tex]
1.08/1.03 - 1 = 0.048543
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 64,507.99
time 33
rate 0.048543
[tex]64507.99 \times \frac{1-(1+0.048543)^{-33} }{0.048543} = PV\\[/tex]
PV $1,101,832.0536
