Question

Dan would like to save $1,500,000 by the time he retires in 30 years and believes he can earn an annual return of 8%. How much does he need to invest in each of the following years to achieve his goal?

a. $13,241
b. $133,239
c. $10,727
d. $52,450

Answer 1

$13,241

Step-by-step explanation:

From the data we were given in the question:

future value = fv = $1,500,000

time = t = 30 year

rate = r = 8%

We are required to find out How much does he need to invest to achieve his goal

solution

future value = principal ( 1+ rate)^(t-1) / rate

1500000 = principal (1 + .08)^(30-1)/ 0.08

we make principal, p, subject of the formula.

principal = 1500000 / ( (1 + .08)^(30-1)/ 0.08 )

Principal = 1,500,000 / 113.2832

principal = 13241.15

so Dan needs to invest $13241