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Alexa is saving for retirement, she is 35 years old and wants to retire at 70....

Alexa is saving for retirement, she is 35 years old and wants to retire at 70. She estimates that she will need to have $1.2 million to retire comfortably. She currently deposits $550 a month into her account 401k, what APR does she need to earn?

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Answer #1

We can use financial calculator for calculation of APR using below key strokes:

deposits are monthly. so, we need to convert no. of years in to months. no. of years are 70 - 35 = 35 and no. of months are 35*12 = 420 months.

N = no. of months = 420; PMT = monthly deposits = -$550; FV = future value = $1,200,000; PV = 0 > CPT = compute > I/Y = interest rate = 0.6496%

Interest rate we calculated above is monthly rate. To get APR we need to multiply monthly interest rate with 12.

APR = monthly interest rate*12 = 0.6496%*12 = 7.7952% or 7.8%

PMT should be entered as negative value otherwise calculator will show error.

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