You want to retire with $400 000 in the bank and you are able to earn 6% compounded quarterly for the next 25 years. How much money do you have to invest today in order to achieve your goal?
A) $90 251.78
B) $90 251.77
C) $90 001.78
D) $90 201.77
E) $90 001.77

Question

Quizplus · Accepted Answer

To find the present value (the amount you need to invest today) to achieve a future value of $400,000 with an interest rate of 6% compounded quarterly for 25 years, you use the formula for the present value of a single sum: PV = FV / (1 + r/n)^(nt). Here, FV = $400,000, r = 0.06 (6%), n = 4 (quarterly compounding), and t = 25 years. Plugging these values into the formula gives you the present value, which rounds to $90,251.78.

You Want to Retire with $400 000 in the Bank