Your lifetime financial goal is to have $1,250,000 invested in a mutual fund when you retire in 40 years. You plan to invest $1,000 in a mutual fund now, and then invest an additional $200 per quarter for 40 years. What average return must the fund provide to meet your investment goal?

Question

Quizplus · Accepted Answer

The correct answer is D.The future value of the investment can be calculated using the formula: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, the future value is $1,250,000, the present value is $1,000, the number of years is 40, and the quarterly investment is $200.We can use the formula to solve for the annual interest rate:$1,250,000 = $1,000 * (1 + r)^160(1 + r)^160 = 1,2501 + r = 1.0316r = 0.0316r = 3.16%The average annual return must be 3.16% to meet the investment goal.

Your Lifetime Financial Goal Is to Have $1,250,000 Invested in a Mutual