QUESTION: Assume a world without inflation. Mr. Littlewood, 35, plans to retire at age 60. His life expectancy is age 87. He wants to live a retirement lifestyle that will cost #30,000 in the first year of retirement, payable at the beginning of each year. Subsequent retirement expenses will grow at a rate of 3% p.a., payable at the beginning of the year. He now has $20,000 in his investment account and plans to invest an equal amount annually for his retirement. The rat of interest that he expects to earn is 5%.
Calculate the following:
(a) the amount he will need at retirement,
(b) the annual investment that he must make in order to reach his goal in (a)