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10 November, 06:54

You have been told that you need $25,600 today in order to have $100,000 when you retire 35 years from now. what rate of interest was used in the present value computation? assume interest is compounded annually

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  1. 10 November, 07:22
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    Hi there

    The formula is

    A=p (1+r) ^t

    A future value 100000

    P present value 25600

    R interest rate?

    T time 35 years

    We need to solve for r

    R = (A/p) ^ (1/t) - 1

    R = (100,000:25,600) ^ (1:35) - 1

    R=0.0397*100

    R=3.97% round your answer to get

    R=4%

    Good luck!
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