Question

In: Finance

What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?

Your parents will retire in 17 years. They currently have $370,000 saved, and they think they will need $1,600,000 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.

Solutions

Expert Solution

Future value=Initial investment*(1+r)^n

where

r-intrest rate

n-number of years of investment=17

Initial investment=370000

Future value=1600000

Putting values

1600000=370000*(1+r)^17

Solving we get

r-0.08995

Thus intrest rate to be earned=9.00%(Rounded to 2 decimal places)


Related Solutions

Juan Arancho has $12,000 and would like to double his money in 8 years. What rate would he need to earn to reach is goal?
Juan Arancho has $12,000 and would like to double his money in 8 years. What rate would he need to earn to reach is goal?   A.   9.0508%    B.   8.8548%    C.   8.7589%
6. (Basic time period) If you can earn interest at an annual interest rate of 9%,...
6. (Basic time period) If you can earn interest at an annual interest rate of 9%, how long will it take for $25,000 to grow to be: Using Excel a. $30,000? b. $40,000? c. $75,000? d. $100,000?
4. What annual interest rate would you need to earn if you wanted a $200 per...
4. What annual interest rate would you need to earn if you wanted a $200 per month contribution to grow to $14,700 in five years? 5. You wish to buy a $20,000 car. The dealer offers you a 5-year loan with an 8 percent APR. What are the monthly payments? 6. Joey realizes that he has charged too much on his credit card and has racked up $3,000 in debt. If he can pay $150 each month and the card...
If an investment of $40,000 is earning an interest rate of 8.00%, compounded annually, then it will take 4.50 years for this investment to reach a value of $56,554.46—assuming that no additional deposits or withdrawals are made during this time.
Please show excel calculationsIf an investment of $40,000 is earning an interest rate of 8.00%, compounded annually, then it will take 4.50 years for this investment to reach a value of $56,554.46—assuming that no additional deposits or withdrawals are made during this time.Which of the following statements is true—assuming that no additional deposits or withdrawals are made?If you invest $5 today at 15% annual compound interest for 82.3753 years, you’ll end up with $100,000.If you invest $1 today at 15%...
At what annual interest rate must $345,000 be invested so that it will grow to be $1,520,000 in 25 years?
  At what annual interest rate must $345,000 be invested so that it will grow to be $1,520,000 in 25 years? How many years will it take for $56,000 to grow to be $500,000 if it is invested in an account with an annual interest rate of 11%? What will $15,000 grow to be in 35 years if it is invested today in an account with an annual interest rate of 12% If you wish to accumulate $1,250,000 in 28...
Originally, Olivia planned her life assuming she could borrow or save at r1 (interest rate). Now...
Originally, Olivia planned her life assuming she could borrow or save at r1 (interest rate). Now Olivia is told that she can save money at an interest rate of r2 and borrow at an interest rate of r3, where r3>r1>r2. Draw Olivia's budget constraint. What can you conclude about Olivia's new consumption bundle, as compared to the one she anticipated originally?
Assuming annual interest payments and a principal value of $100, what is the value of a...
Assuming annual interest payments and a principal value of $100, what is the value of a 4-year 6.8% coupon bond when the discount rate is i) 4.8%, ii) 6.8%, and iii) 7.1%? Show that your results are consistent with the relationship between the coupon rate, discount rate, and price relative to par value. -->(I looked the sample but didn't get it very well), Please explain it clearly, Thank you
Assuming annual interest payments and a principal value of $100, what is the value of a...
Assuming annual interest payments and a principal value of $100, what is the value of a 4-year 6.8% coupon bond when the discount rate is i) 4.8%, ii) 6.8%, and iii) 7.1%? Show that your results are consistent with the relationship between the coupon rate, discount rate, and price relative to par value.
Using the appropriate present value table and assuming a 12% annual interest rate, determine the present...
Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2018, of a five-period annual annuity of $6,200 under each of the following situations: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1.The first payment is received on December 31, 2019, and interest is compounded annually. 2.The first payment is received on...
Using the appropriate present value table and assuming a 12% annual interest rate, determine the present...
Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2018, of a five-period annual annuity of $7,700 under each of the following situations: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1.The first payment is received on December 31, 2019, and interest is compounded annually. 2.The first payment is received on...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT