Question

Susan has a 401k plan through her job and has accumulated $375,000 in her account. Her company has invested her funts in a high interest bearing account yielding 8% per year. She would like to retire with $600,000 in her account. When will she be able to retire?

Answer 1

6.1 years

Step-by-step explanation:

Data provided in the question:

Principle amount = $375,000

Interest rate, r = 8% = 0.08

Future value = $600,000

Now,

Using the compounding formula

Future value = Principle × [ 1 + r ]ⁿ

Here,

n is the time

thus,

$600,000 = $375,000 × [ 1 + 0.08 ]ⁿ

or

1.6 = 1.08ⁿ

taking log both the sides, we have

n × ln(1.08) = ln(1.6)

or

n = 6.1 years