3.) Finding the required interest rate Your parents will retire in 20 years. The

Question

3.) Finding the required interest rate

Your parents will retire in 20 years. They currently have $320,000, and they think they will need $2,500,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places.

4.) Time for a lump sum to double

If you deposit money today in an account that pays 6% annual interest, how long will it take to double your money? Round your answer to two decimal places.

5.) Present and future values for different periods

Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually. Round your answers to the nearest cent.

An initial $700 compounded for 1 year at 10%.

$  

An initial $700 compounded for 2 years at 10%.

$  

The present value of $700 due in 1 year at a discount rate of 10%.

$  

The present value of $700 due in 2 years at a discount rate of 10%.

Explanation / Answer

The present value formula is A/(1+r)n. Where A is the amount of which the present value is being calculated, r is the interest rate & n is time period in years.

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