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20 May, 17:34

John would like to save $1,500,000 by the time he retires in 30 years and believes he can earn an annual return of 8%. How much does he need to invest each year to achieve his goal?

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  1. 20 May, 17:48
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    he need to invest $13,241 each year to achieve his goal

    Explanation:

    Target Saving Amount = Future value = F = $1,500,000

    Number of years = n = 30 years

    Inyterest rate = r = 8% = 0.08

    Invetment to be made = P = ?

    Use following formula to calculate Invetment amount

    F = P x ([1 + r]^n - 1) / r

    P = F / ([1 + r]^n - 1) / r

    P = 1,500,000 / ([1 + 0.08]^30 - 1) / 0.08

    P = 1,500,000 / 113.2832

    P = 13241.15
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