Your Father, Who Is 60, Plans to Retire in 2

question 75

Multiple Choice

Your father, who is 60, plans to retire in 2 years, and he expects to live independently for 3 years.He wants a retirement income which has, in the first year, the same purchasing power as R40,000 has today.However, his retirement income will be of a fixed amount, so his real income will decline over time.His retirement income will start the day he retires, 2 years from today, and he will receive a total of 3 retirement payments.Inflation is expected to be constant at 5 percent.Your father has R100,000 in savings now, and he can earn 8 percent on savings now and in the future.How much must he save each year, starting today, to meet his retirement goals?

• A) R1,863
• B) R2,034
• C) R2,716
• D) R5,350
• E) R6,102

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Definitions:

Budgeted Cost

An estimated cost anticipated for a specified period of time or activity.

Raw Materials Purchases

The total cost or volume of raw materials bought by a company for use in production over a specific period of time.

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A financial statement projected for a future date, detailing the expected financial position in terms of assets, liabilities, and equity.

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for.