Answer:
1.
PV = $19108.96057 rounded off to $19108.96
So, $19108.96057 have to be invested today at 10.4% p.a. rate for 40 years for it to turn into a million dollars.
2.
PV = $131634.7058 rounded off to $131634.71
So, $131634.7058 have to be invested today at 5.2% p.a. rate for 40 years for it to turn into a million dollars.
3.
Times more investment = 6.888637682 times rounded off to 6.89 times
Explanation:
1.
To calculate how much we need to invest today for it to turn into $1 million in 40 years at 10.4% per annum rate, we will use the Present value of a sum formula as we need to determine the present value of $1 million earned after 40 years from today. The formula for present value of a sum is,
PV = FV / (1+r)^t
Where,
- PV is present value
- FV is future value
- r is the rate of interest or return
- t is the time period in years
PV = 1,000,000 / (1+0.104)^40
PV = $19108.96057 rounded off to $19108.96
So, $19108.96057 have to be invested today at 10.4% p.a. rate for 40 years for it to turn into a million dollars.
2.
Half the percentage rate of 10.4% p.a. = 10.4% / 2 = 5.2%
PV = 1,000,000 / (1+0.052)^40
PV = $131634.7058 rounded off to $131634.71
So, $131634.7058 have to be invested today at 5.2% p.a. rate for 40 years for it to turn into a million dollars.
3.
Times more investment = 131634.7058 / 19108.96057
Times more investment = 6.888637682 times rounded off to 6.89 times
