Question

Your parents will retire in 19 years. They currently have $290,000 saved, and they think they will need $1,300,000 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.

  %

Answer 1

future value of single amount = amount deposited *(1+ r)^n

here,

future value = 1,300,000

amount deposited = 290,000

r = to be found out

n =19

1,300,000 = 290,000*(1+r)^19

=>4.48275862= (1+r)^19

=>1+r = (4.48275862)^(1/19)

=>1+r=1.08216096

=>r =0.08216096

=>8.22%.