75-Year-Old Grandmother Expects to Live for Another 15 Years

question 129

Multiple Choice

75-year-old grandmother expects to live for another 15 years.She currently has $1,000,000 of savings, which is invested to earn a guaranteed 5% rate of return.If inflation averages 2% per year, how much can she withdraw (to the nearest dollar) at the beginning of each year and keep the withdrawals constant in real terms, i.e., growing at the same rate as inflation and thus enabling her to maintain a constant standard of living?

• A)$65,632
• B)$72,925
• C)$81,027
• D)$89,130
• E)$98,043

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Definitions:

Mindfulness

The practice of maintaining a nonjudgmental state of heightened or complete awareness of one's thoughts, emotions, or experiences on a moment-to-moment basis.

Self-efficacy

The faith a person has in their potential to implement actions essential for reaching particular achievements.

Grandiose View

An inflated self-perception, often characterized by overestimation of one's importance or abilities.

Narcissism

A psychological condition marked by an inflated sense of self-importance, need for admiration, and lack of empathy for others.