Question

Your uncle plans to retire in 20 years. He currently has $500,000, and think he will need $2,500,000 at retirement. If he can save $10,000 at the end of each year in the following 20 years, what annual rate of interest must he earn to reach his goal

Answer 1

The annual rate of interest comes 7.37%

Step-by-step explanation:

The computation of the annual rate of return is shown below:

Given that

Present value = $500,000

Future value = $2,500,000

PMT = $10,000

NPER = 20 years

Now we use the RATE formula

= RATE(NPER,PMT,-PV,FV,type)

Perform this on an excel

After applying the above formula,

The annual rate of interest comes 7.37%

And, the same is to be considered