Here's the question.
Sarah Ling is seventeen (17) years old and has big plans to retire when she is fifty (50) years old. She estimates she will need $3,000 at the end of each month for thirty (30) years to live comfortably in her old age and guesses that the interest rate will remain constant at 5% compounded annually during that time. Sarah has $10,000 in savings today and plans to save $2,000 each year to achieve her goal.
1. What interest rate must Sarah obtain in order to meet her goal? 2. If Sarah can save $3,000 per year, what interest rate must she obtain at minimum to meet her goal? 3. If Sarah defers her retirement plans for five (5) years, and then starts adding $5,000 to her savings each year, will she meet her goal of retiring at five (50)? Assume the interest rate is 6.5% compounded annually for period of time until she reaches fifty (50) years of age.
Using my financial calculator....
comp pv = 565,988.4258
comp i = 9.2619 %
It was not taught to use a formula for this But couldn't you use the above formula and isolate for "I"?
comp fv = 429, 979.04
I used theses 2 formula to find the above answer
Thank you very much to those that will participate.