Joe Nautilus has $210,000 and wants to retire. What return must his money earn so he may receive annual benefits of $30,000 for the next 10 years.
A) 12%
B) Between 12% and 13%
C) About 7%
D) Greater than 15%

Question

Quizplus · Accepted Answer

The correct answer is C. About 7%.The formula for calculating the annual return required to receive a certain amount of benefits for a certain number of years is:r = (B / P) * (1 - (1 + r)^-n)where:r = annual returnB = annual benefitsP = principaln = number of yearsIn this case, we have:B = $30,000P = $210,000n = 10Plugging these values into the formula, we get:r = (30,000 / 210,000) * (1 - (1 + r)^-10)Solving for r, we get:r = 0.0694 or about 7%

Joe Nautilus Has $210,000 and Wants to Retire