11 Your parents will retire in 18 years They currently have

11. Your parents will retire in 18 years. They currently have $250,000 saved, and they think they will need $1,000,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don\'t save any additional funds?

Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

1,000,000=250000(1+r/100)^18

(1,000,000/250,000)^(1/18)=(1+r/100)

(1+r/100)=1.0801

r=(1.0801-1)*100

=8.01%(Approx).