ASSUME that in 25 years you will need $500,000 for your retirement (i

Finance Aug 09, 2020

ASSUME that in 25 years you will need $500,000 for your retirement (i.e. retirement is actually 25 years away, and you want to have saved $500,000). How much money would you have to put into a bank today to accumulate this if your money will earn 8% per year (assume annual compounding)?

Expert Solution

Computation of the present value:-

Future value = Present value * (1 + rate)^n

$500,000 = Present value * (1+8%)^25

Present value = $500,000 / 6.84848

= $73,008.95

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