How to save money


Response to the following problem:

Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $20,000 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $320,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $1,000,000 to his nephew Frodo. He can afford to save $1,900 per month for the next 10 years. If he can earn an 11 percent EAR before he retires and an 8 percent EAR after he retires, how much will he have to save each month in years 11 through 30?

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Financial Accounting: How to save money
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