natenut2006
contestada

Your parents will retire in 20 years. They currently have $300,000 saved, and they think they will need $1,450,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?

Respuesta :

mathmate
n=20 periods (years)
present value, P = 300,000
future value, F= 1450000
i=annual interest rate

[tex]F=P(1+i)^n[/tex]
[tex]1450000=300000(1+i)^{20}[/tex]
[tex](1+i)^{20}=1450000/300000[/tex]
[tex](1+i)^{20}=29/6[/tex]
[tex](1+i)=(29/6)^{1/20}[/tex]
[tex]i=(29/6)^{1/20}-1[/tex]
[tex]i=(29/6)^{1/20}-1[/tex]
[tex]=1.081963-1[/tex]
[tex]=0.081963[/tex]
[tex]=8.1963%[/tex]

Answer: they need to earn 8.1963% or more to achieve their goal.

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