Question

Your parents will retire in 23 years. They currently have $250,000 saved, and they think they...

Your parents will retire in 23 years. They currently have $250,000 saved, and they think they will need $1,150,000 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.

Homework Answers

Answer #1
Current savings (Present value) = 250000
Amount needed at retirement (Future Value) = 1150000
Time period =    23 Years
Present Value = Future Value / (1+r)^n
250000 .           = 1150000 / (1+r)^23
(1+r)^23 = 1150000/250000= 4.6
(1+r) = (4.6)^(1/23)
1+r = 1.068600955
r = 0.068600955 or 6.86%
So, Interest rate they earn to reach their goal is 6.86%.
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