I have a question that says that they need to maintain cost of living of 100,000 over the next 10 years that needs to grow at an inflation rate of 3% starting year 2 onwards. The discount eate is 2.2%. They gave the below but I dont know how to do this on the calculator. Can any one help. Thanks.
or Goal 2, which has a time horizon of 10 years and a required probability of success of 99%, Module B should be chosen because its 2.2% expected return is higher than the expected returns of all the other modules. The present value of Goal 2 is calculated as follows:
PV=$100,000(1.022)1+$100,000(1.03)1(1.022)2+$100,000(1.03)2(1.022)3+⋯+$100,000(1.03)9(1.022)10
PV = $1,013,670 (or $1.01 million)
PMT = 100000/1.03 <— Cost of living in previous year
I/Y = (1.022/1.03 - 1) * 100 <— Adjusted discount rate
FV = 0
N = 10
CPT PV -1,013,669.77
You can watch this video if you want to know more: https://youtu.be/KbUTi65Ev9I