Question

You just won the lottery and after taxes you have $32,000. You want to have $1,000,000 by the time you are 65, which is 45 years from now. Assuming that you can earn 9 percent each year on your money, how much (in dollars) of the $32,000 must you invest today

Answer 1

$20.692.24 must be invested

Step-by-step explanation:

The amount to be invested today is the present value of $1,000,000 discounted at 9%.

PV = FV× (1+r)^-n

PV - present value , FV- Future value , r- rate of return, n- number of years

FV =1,000,000, r- 9%, n- 45

PV = 1,000,000 × 1.09^(-45)

PV = 20,692.24

Present Value = $20.692.24

$20.692.24 must be invested out of the $32,000