Your parents will retire in 20 years. They currently have $350,000 saved, and they think they will need $1,850,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places. %
Your parents will retire in 20 years. They currently have $350,000 saved, and they think they will need $1,850,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places. %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Your parents will retire in 20 years. They currently have $350,000 saved, and they think they will need
$1,850,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't
save any additional funds? Round your answer to two decimal places.
%
Expert Solution
Introduction
Future Value (FV) is a financial measure that represents the expected value of an investment at a future point in time, based on an assumed rate of return. It is calculated by applying compound interest to the initial investment or principal, which results in the investment earning interest not only on the principal, but also on any interest that has accumulated over time. The formula for calculating future value is FV = PV x (1 + r)^n, where PV is the present value or initial investment, r is the interest rate, and n is the number of compounding periods.
Here,
Future Value of investment “FV” = $1,850,000
Present value of savings “PV” = $350,000
Number of years of investment “” = 20
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