Question

Amanda Sorenson is planning her retirement. She is presently investing in a 401(k) but needs an additional $500,000 to reach her retirement goal. As luck would have it. Amanda just won a brand new car that is worth $36,000 in a raffle. If Amanda were to sell the car and invest the $36,000 proceeds at a rate of 6.50%, compounded annually, how long will it be before Amanda could retire? (Round off to the nearest 1/10 of a year) a. 36.6 years b. 41.8 years c. 24.0 years d. 52.2 years

Answer 1

Answer:

Number of year = 41.8 (Approx)

Explanation:

Given:

Total amount Amanda want (Future value) = $500,000

Amanda investment amount (Present Value) = $36,000

Rate of interest (r) = 6.50% = 6.50 / 100 = 0.065

Number of year (n) = ?

Computation of Number of year:

$Future\ value = Present\ Value(1+r)^n\\\\500,000 = 36,000(1+0.065)^n\\\\500,000/36,000 = (1.065)^n\\\\13.8888889 = (1.065)^n\\\\n = 41.78$

Number of year = 41.8 (Approx)