Question

Your parents will retire in 15 years. They currently have $340,000 saved, and they think they will need $2,000,000 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

We Know that

FV = PV(1+r)ⁿ

PV (Present Value) = $340000

n(Time period) = 15 years

FV(Future Value) = $2000000

r = Interest rate

So , putting values

2000000 = 340000(1+r)¹⁵

r = (2000000/340000)^(1/15) -1 = 12.54%

They should earn an annual rate of interest of 12.54%