CRPC Practice Exam #2 Solved 100%

Richard wants to have an annual retirement income of $100,000 (payable at the beginning of each year) protected against 3% inflation. Assuming a 7% after-tax rate of return and a retirement period of 30 years, how much money does Richard need in order to meet his goal? Explain how you need to input this on the calculator and why. - ANSWER-Step One - Set the calculator to BEGIN. Step Two - Calculate the inflation adjusted rate of return (One plus the Rate of Return divided by One plus the interest rate, minus one, multiplied by 100 = the inflation adjusted rate of return) Put this number in the I/YR Step Three - 100,000 goes in as a PMT Step Four - 30 goes in as N Step Five -Press PV Richard needs $1,822,042.88 in today's dollars to meet his needs. How do you calculate the inflation-adjusted rate of return? - ANSWER-1 plus the Rate of Return Divided by 1 plus the interest rate minus one multiplied by 100 Tom has been promised a stream of $40,000 annual payments at the end of each year for 25 years. The present value of these payments discounted at a rate of 5% is which one of the following amounts? - ANSWER-Step One - The problem says END in it so you have to set your calculator to the END mode. Step two - Enter the $40000 as a PMT Step Three - Enter 25 as the N. Step Four - Enter 5 as the I/R