Question

Burton Bush wants to retire in Arizona when he is 80 years of age. Burton, who is now 55, believes he will need $400,000 to retire comfortably. To date, he has set aside no retirement money. If he gets an interest of 6 percent compounded annually, he will have to invest today: (Use the tables in the handbook)

$92,300
$69,900
$96,500
$93,200
None of these

Answer 1

n = Number of years = 80 - 55 = 25
A = $400,000
r = 6% = 0.06

A = P(1 + r)^n
400,000 = P(1 + 0.06)^25 = P(1.06)^25 = 4.292P
P = 400,000 / 4.292 = $93,200