Question

Your parents will retire in 18 years. They currently have $270,000 saved, and they think they will need $1,050,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?

Answer 1

FV = $1,050,000

PV = $270,000

N = 18years, let interest be i

We have, FV = PV*(1+i)^n

              $1,050,000 = $270,000*(1+ i)^18

              3.888         = (1+i)^18

           (3.888)^(1/18) = 1 + i

                    1.0784 = 1+ i

Therefore interest is 7.84%