Problem: Assume that you are planning on how much you need to save for retirement. You expect to live for 30 years in retirement and would like to spend $100,000 (in real terms) per year, while leaving a $1,000,000 bequest to the International Red Cross. You are 35 years away from retirement. How much do you need to save at the end of each year if you earn 5% real (i.e., after inflation) during your working years and 3% during your retirement years?
Solve the problem in different ways: by using a spreadsheet; by using the formulas for the present value of an annuity and for a loan payment.