You have decided that you want to be a millionaire when you retire in 45 years. a. If you can earn an annual return of 11.28 percent, how much do you have to invest today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What if you can earn an annual return of 5.64 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
You have decided that you want to be a millionaire when you retire in 45 years. a. If you can earn an annual return of 11.28 percent, how much do you have to invest today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What if you can earn an annual return of 5.64 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 18PROB
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Question
| You have decided that you want to be a millionaire when you retire in 45 years. |
| a. |
If you can earn an annual return of 11.28 percent, how much do you have to invest today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. |
What if you can earn an annual return of 5.64 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Expert Solution
Step 1
Present Value(PV) is value of a future amount at current point of time. It is done by discounting that amount to current time with given interest rate.
Future Value(FV) is value f current amount at future point of time. It is done by compounding that present amount future time with given interest rate.
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