Question

John would like to save $1,500,000 by the time he retires in 30 years and believes he can earn an annual return of 8%. How much does he need to invest each year to achieve his goal?

Answer 1

Answer:

he need to invest $13,241 each year to achieve his goal

Explanation:

Target Saving Amount = Future value = F = $1,500,000

Number of years = n = 30 years

Inyterest rate = r = 8% = 0.08

Invetment to be made = P = ?

Use following formula to calculate Invetment amount

F = P x ([1 + r]^n - 1 )/r

P = F / ([1 + r]^n - 1 )/r

P = 1,500,000 / ([1 + 0.08]^30 - 1 )/0.08

P = 1,500,000 / 113.2832

P = 13241.15