Question

Your parents will retire in 28 years. They currently have $260,000 saved, and they think they will need $2,500,000 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

Amount Invested currently = $260,000

Future Value to accumulate in 28 years = $2500,000

Calculating the Annual rate of Interest that would be earned to accumulated the amount:-

Future Value = Invested Amount*(1+r)^n

Where,

r = Periodic Interest rate

n= no of periods = 28 years

$2500,000 = $260,000*(1+r)^28

9.61538461538 = (1+r)^28

Taking 28-root on both sides,

1.084191 = (1+r)

r = 8.42%

So, annual interest rate must they earn to reach their goal is 8.42%

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