Question

At age 60, you find that your employer is moving to another location. You do not wish to move and instead will receive a termination package of $100,000. You don’t want to retire for another 5 years so you take a job in your current location, which just covers your living expenses. If you invest the $100,000 at 8% today, how much will you have when you retire in 5 years?

Answer 1

By investing $100,000 at an 8% annual interest rate, compounded annually, for 5 years, you will have $146,933 at the time of retirement.

Step-by-step explanation:

If you invest $100,000 at an 8% annual interest rate today, the amount you will have when you retire in 5 years can be calculated using the formula for compound interest. The formula for compound interest is A = P(1 + r/n)nt, where:

• P is the principal amount (the initial amount of money)
• r is the annual interest rate (decimal)
• n is the number of times the interest is compounded per year
• t is the number of years the money is invested for
• A is the amount of money accumulated after n years, including interest.

Assuming that the interest is compounded annually (n=1), the formula simplifies to A = P(1 + r)t. Plugging in your values: A = $100,000(1 + 0.08)5 = $100,000(1.08)5Calculating this out, A = $100,000 * 1.46933 = $146,933 (rounded to the nearest dollar). Therefore, you will have $146,933 when you retire in 5 years.