Question

Your parents will retire in 27 years. They currently have $280,000 saved, and they think they will need $1,900,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places.

Answer 1

Annual Rate=7.35%

Step-by-step explanation:

Calculation for the annual interest rate must they earn to reach their goal

Number of years =27

PV =280,000

FV =1,900,000

Using this formula

Annual Rate=(FV/PV)^(1/n)-1

Let plug in the formula

Annual Rate=(1,900,000/280,000)^(1/27)-1

Annual Rate=6.7857^(1/27)-1

Annual Rate=1.07349-1

Annual Rate=0.0735

Annual Rate=7.35%

Therefore the annual interest rate must they earn to reach their goal will be 7.35%