Question

How much money would you have to invest today, at an interest rate of 5% in order to reach your goal of $1,000,000 in 30 years? Assume you don't put any additional money into this investment.

$123,737.45

$321,377.45

$231,377.45

$132,733.45

How much money would you need to invest every year in order to reach your goal of $1,000,000 in 30 years at the same interest rate of 5%, if you had no money up-front TODAY to invest? (PV=0)

$15,051.44

$231,377.45

$1,000,000

$33,333.33

Answer 1

1)Future value= $1000000, time = 30 years.

To find the present value of the amount $1000000, we have to multiply the future value of the amount by the present value facter at the rate of 5% for 30 years.

= 1000000/ 4.3219 = $231377.45

2) If the money is invested each year:

Considering the formula we can compute the Present value as:

= 1000000 ( 0.05/ 3.32194)

= 1000000 ( 0.015) = $15051.44