You want to retire in 40 years and you have $40,000 saved in your retirement account. You believe you will need $1,500,000 upon retirement. What rate will you need to earn on the account to achieve this goal?
A) 6.75 percent
B) 7.48 percent
C) 9.13 percent
D) 9.48 percent

Question

Quizplus · Accepted Answer

The correct answer is D. 9.48 percent.The formula for calculating the future value of an investment is:FV = PV * (1 + r)^nwhere:FV is the future valuePV is the present valuer is the annual interest raten is the number of yearsIn this case, we have:PV = $40,000FV = $1,500,000n = 40Solving for r, we get:r = (FV / PV)^(1/n) - 1r = ($1,500,000 / $40,000)^(1/40) - 1r = 9.48%

You Want to Retire in 40 Years and You Have