Question

In: Finance

Finance- Time Value of Money

    You believe you will need to have saved $500,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 6 percent per year, how much must you save each year to meet your retirement goal?

 

Solutions

Expert Solution

Given Data:

Amount= 500,000

n= 40 years

Interest Rate= 6%

Using Formula:

Future Value: Pv X r / (1+r)^n-1

= 500,000 X 0.06 / (1 + 6 % ) ^ 40 - 1 

 

= 500,000 X 0.06 / (1 + 0.06 % ) ^ 40 - 1 

= 30,000 / 9.2857

= $3230.77

The answer will be $3230.77


$3230.77 must be saved each year to meet the retirement goal

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