Your parents will retire in 25 years They currently have 400

Your parents will retire in 25 years. They currently have $400,000 saved, and they think they will need $1,600,000 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.

Solution

Future Value = Present Value * ( 1+ Rate of Interest) ^ Time Period

$ 1,600,000= $ 400,000 * ( 1+  Rate of Interest) ^ 25

or [($ 1,600,000/ $ 400,000) ^ ( 1/25) ] - 1=Rate of Interest

or 5.701804056% = Rate of Interest

Hence the correct answer is 5.70%