On her 25th birthday a young female engineer decides to start saving toward building up a retirement fund that pays 6% annual interest, compounded monthly (market interest rate). She feels that $1000000 worth of purchasing power in today’s dollars will be adequate to see her through her sunset years after her 65th birthday. Assume a general inflation rate of 4% per year.
(a) If she plans to save by making 480 equal quarterly deposits, what should be the amount of her monthly deposit in future dollars?
(b) if she plans to save by making end-of-the-year deposits, increasing by $1000 over each subsequent year, how much would her first deposit be in the future dollars?