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Calculate the future value of income

Tina, age 50 is an accountant. She earns $50,000 a year. After consulting with you, she concludes that she can live on 70% of her current salary if she were to retire today. You anticipate that she will earn $12,000 in Social Security benefits (in today's dollars), and that inflation will average 3% a year. You are also confident that you can help her earn a 9% after tax rate of return on her investments. Assume that she will live 35 years in retirement.

Calculate the future value of her income need when she retires at age 65.

A. $59,203

B. $50,000

C. $38,987

D. $35,833

E. $23,000

How much, in terms of a pool of assets, does Tina need on her first day of retirement?

A. $674,369

B. $561,240

C. $522,185

D. $451,420

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## Q : Calculating the expected value of wealth

Consider a person with the following utility function over wealth: u(w) = ew, where e is the exponential function (approximately equal to 2.7183) and w = wealth in hundreds of thousands of dollars. Suppose that this person has