You Would Like to Have Enough Money Saved to Receive

question 47

Multiple Choice

You would like to have enough money saved to receive $80,000 per year perpetuity after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that the perpetuity payments start one year from the date of your retirement. The interest rate is 8%) ?

• A) $7,500,000
• B) $750,000
• C) $1,000,000
• D) None of the above

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Definitions:

Opportunity Costs

The cost of an alternative that must be forgone in order to pursue a certain action or the benefits you miss out on when choosing one alternative over another.

Economic Welfare

The overall health and well-being of an economy, often measured by standards of living, availability of goods and services, and income distribution.

Economic Efficiency

A state in which resources are ideally distributed to best meet the needs of every person or entity, reducing waste and inefficiency to a minimum.

Gains From Trade

The benefits that parties obtain from engaging in voluntary exchange of goods or services.