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A rich uncle wants to make you a millionaire. How much money must he deposit in a trust fund paying 8% compounded quarterly at the time of your birth to yield $1,000,000 when you retire at age 58
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A rich uncle wants to make you a millionaire. How much money must he deposit in a trust fund paying 8% compounded quarterly at the time of your birth to yield $1,000,000 when you retire at age 58

User Shanki Bansal
by
4.7k points

1 Answer

10 votes

Answer:

Initial investment= $10,110.21

Step-by-step explanation:

Giving the following information:

Future value (FV)= $1,000,000

Interest rate (i)= 0.08/4 = 0.02

Number of periods (n)= 58*4= 232 quarters

To calculate the initial investment (PV), we need to use the following formula:

PV= FV/(1+i)^n

PV= 1,000,000 / (1.02^232)

PV= $10,110.21

User Pavan Manjunath
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5.4k points
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