Question

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

Answer 1

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!