Question

If you want $5 million in 35 years and deposit $65 per day, what annual rate will you have to earn to reach your goal? A. 2.29% B. 3.87% C. 8.35% D. 8.90%

Answer 1

To calculate the rate needed to reach your goal, we can use the future value formula:

FV = PV x (1 + r)^n

Where:

FV = future value
PV = present value (in this case, it's 0 because you're starting with no money)
r = annual rate
n = number of years

We know that FV = $5 million, n = 35 years, and the amount deposited each day is $65 x 365 = $23,725 per year.

So substituting these values into the formula, we get:

$5,000,000 = 0 x (1 + r)^35 + $23,725 x [(1 + r)^35 - 1]/r

Simplifying this equation, we get:

(1 + r)^35 = 210.6757

Taking the 35th root of both sides, we get:

1 + r = 1.023

Subtracting 1 from both sides, we get:

r = 0.023 or 2.29%

So the answer is A. 2.29%.