Sarah Wiggum would like to make a single lumpsum investment

?Sarah Wiggum would like to make a single? lump-sum investment and have

?$2.32.3

million at the time of her retirement in

2828

years. She has found a mutual fund that expects to earn

55

percent annually. How much must Sarah invest? today? If Sarah earned an annual return of

1414

?percent, how much must she invest? today?

a.??If Sarah can earn

55

percent annually for the next

2828

?years, how much will she have to invest? today?

? $nothing??

?(Round to the nearest? cent.)b.??If Sarah can earn

1414

percent annually for the next

2828

?years, how much will she have to invest? today?

?$nothing??

?(Round to the nearest? cent.)

Solution

at 5% amount that Sarah must invest today = 2,300,000/1.05^28 = 586,715.37

at 14% amount that Sarah must invest today = 2,300,000/1.14^28 = 58,666.75