Question

Dr. Porterfield a financial counselor guru informed Mr. Halpayne he needs $2,000,000 saved if he intends to retire with his wives (7 of them) and not be homeless in future. Calculate the present value Mr. Halpayne needs if he intends to retire in 20 years provided he invests in a financial plan that pays 5% interest compunded monthly.

Answer 1

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Answer:

$737,289

Explanation:

The future value of an investment P invested at rate r per year compounded monthly for t years is ...

FV = P(1 +r/12)^(12·t)

We want to find P for the given future value, so we can solve for that:

P = FV/(1 +r/12)^(12·t) = FV(1 +r/12)^(-12·t)

P = $2,000,000(1 +.05/12)^(-240) = $737,289

Mr. Halpayne needs a present value of $737,289 to support his retirement.