Question

Your parents will retire in 28 years. They currently have $250,000 saved, and they thiak they wi need $2.300,000at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places,

Answer 1

To reach their retirement goal, your parents must earn an annual interest rate of approximately 13.81%.

Step-by-step explanation:

To calculate the annual interest rate your parents must earn to reach their retirement goal, we can use the compound interest formula. The formula is:

Future Value = Present Value * (1 + Interest Rate)^Number of Periods

In this case, the present value is $250,000, the future value is $2,300,000, and the number of periods is 28 years. We can rearrange the formula to solve for the interest rate:

Interest Rate = (Future Value / Present Value)^(1 / Number of Periods) - 1

Plugging in the values, we get:

Interest Rate = ($2,300,000 / $250,000)^(1 / 28) - 1

Calculating this, we find that your parents must earn an annual interest rate of approximately 13.81% to reach their retirement goal.