Question

You have decided that you want to be a millionaire when you retire in 44 years. If you can earn an annual return of 11.38 percent, how much do you have to invest today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Investment $ What if you can earn an annual return of 5.69 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

PV = $8,719.322

PV= $87,600.88

Step-by-step explanation:

Calculation for how much do you have to invest today If you can earn an annual return of 11.38 percent

Using this formula

PV = FV / (1 +r)t

Let plug in the formula

PV = $1,000,000 / (1.1138)^44

PV=$1,000,000/114.7878460565

PV = $8,719.322

Therefore If you can earn an annual return of 11.38 percent the amount you have to invest today will be $8,719.322

Calculation for if you can earn 5.69 percent

PV = $1,000,000 / (1.0569)^44

PV =$1,000,000/11.41540982272

PV= $87,600.88

Therefore If you can earn an annual return of 5.69 percent the amount you have to invest today will be $87,600.88