Burton Bush wants to retire in Arizona when he is 80 years of age. Burton, who is now 55, believes he will need $400,000 to retire comfortably. To date, he has set aside no retirement money. If he gets an interest rate of 6% compounded annually, he will have to invest today (use the tables in the handbook):

Question

Quizplus · Accepted Answer

To find out how much Burton needs to invest today, we can use the present value formula:

Present Value = Future Value / (1 + interest rate)^n

Where:
Future Value = $400,000 (the amount Burton needs in the future)
Interest rate = 6%
n = number of years until retirement = 80 - 55 = 25

Plugging in the numbers, we get:

Present Value = $400,000 / (1 + 0.06)^25
Present Value = $93,206.01

So Burton needs to invest $93,206.01 today to have $400,000 when he retires. The closest option is choice D, which is $93,200.

Burton Bush Wants to Retire in Arizona When He Is