Question

Burton Bush wants to retire in Arizona when he is 80 years of age. Burton, who is now 55, believes he will need $400,000 to retire comfortably. To date, he has set aside no retirement money. If he gets an interest of 6 percent compounded annually, he will have to invest today

Answer 1

Comment if you need clarification!

Answer 2

Answer:

The initial invest must be 93.199,45

Step-by-step explanation:

Topic: Compound Interest

Remember the present value and future value formulas. the one needed for this excersice is present value formula, as it follows

$P_{v} = F_{v}/(1+i)^{n}$

to calculate the n value you have to sustract the age of retirement and the actual age being

$n= 80 - 55 = 25$

and the compound interest being 6% annually

so the calculation would be

$P_{v} = \frac{F_{v}}{(1+6\%)^{n} }$

replacing the values would make

$P_{v} = \frac{400.000}{((1+0.06)^{25} } = 93.199,45$