### CFA Practice Question

There are 410 practice questions for this study session.

### CFA Practice Question

A 24-year-old is using the following information to plan her retirement:

Current age: 24
Expected retirement age: 68
Life expectancy: 93
Current annual expenditures: \$30,000
Expected inflation rate of current expenditures until retirement: 3%
Expected return on investment: 8%

She assumes her consumption expenditures will increase with the rate of inflation, 3%, until she retires. Upon retiring, she will have end-of-year expenditures equal to her consumption expenditure at age 68. The minimum amount that she must accumulate by age 68 in order to fund her retirement is closest to ______.
A. \$928,000
B. \$1,176,000
C. \$1,552,000
Explanation: Her consumption spending (currently \$30,000 annually) increases with the rate of inflation (3%) over the next 44 years until she retires. Her annual consumption spending at the time she retires will be \$110,143.57 (PV = 30,000, %I = 3, N = 44, solve for FV). To support that level of spending for 25 years of retirement, assuming an 8% return on her retirement account, she must accumulate \$1,175,756 by her retirement date (PMT = 110,143.57, N = 25, %I = 8, solve for PV).