Question

Your parents will retire in 18 years. they currently have $250,000 saved, and they think they will need $1,000,000 at retirement. what annual interest rate must they earn to reach their goal, assuming they don’t save any additional funds?

Answer 1

$1,00,000 = $250,000 (1+r*18)

4 = 1 + 18r
18r=3
6 = 1/6
r = 16.67% or 16 2/3 %

Answer 2

approximately 16.67%

Step-by-step explanation:

Initial capital = $250000

Final capital in 18 years = $1000000 = capital + interest

Time to reach final capital = 18 years

interest after 18 years = final capital - initial capital

= $1000000 - $250000

= $750000

Interest after 1 year will be = $750000 / 18 = $41666.67

to calculate the interest rate needed to getting $1000000 from investing $250000 in 18 years will be

what percentage of $250000 is $41666.67

= interest / capital * 100

= (41666.67 / 250000) * 100

= 0.1667 * 100 = 16.67%