Scenario 21-3
Diane knows that she will ultimately face retirement. Assume that Diane will experience two periods in her life, one in which she works and earns income, and one in which she is retired and earns no income. Diane can earn $250,000 during her working period and nothing in her retirement period. She must both save and consume in her work period with an interest rate of 10 percent on savings.
-Refer to Scenario 21-3.Assume that Diane decides to consume $100,000 in the work period.How much money will she have available for consumption in her retirement period?

Question

Quizplus · Accepted Answer

Diane will have $150,000 available for savings during her work period ($250,000 - $100,000). At an interest rate of 10%, after one period she will have $165,000 available for consumption during her retirement period ($150,000 x 1.1).

Scenario 21-3 Diane Knows That She Will Ultimately Face Retirement. Assume That