(Q. 3 IN B) WHICH OF THE FOLLOWING STRATEGIES WILL ALLOW REAL RETIR...

5. (Q. 3 in B) Which of the following strategies will allow real retirement spending

to remain approximately equal, assuming savings of $1,000,000 invested at 8

percent annually, a 25-year time horizon, and a 4 percent expected annual

inflation rate?

A) Spend approximately $63,000 annually.

B) Spend approximately $78,225 annually.

C) Spend approximately $93,680 annually.

D) Spend approximately $127,500 annually.

Answer A

+

rate

nominal

1

Using the formula where 1 + real rate =

1

inflation

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