Question

Robin Masters wants to establish an account that will supplement his retirement income beginning 30 years from now. Find the lump sum he must deposit today at 5%, compounded daily, so that $500,000 will be available when he retires. Round your answer to the nearest penny. Show your work using the fx tool.

Answer 1

Answer:

lump sum = $111,576.54

Explanation:

we can use the future value formula:

future value = principal x (1 + i)ⁿ

• future value = $500,000
• i = 5% / 365 = 0.000136986
• n = 30 x 365 = 10,950

principal = future value / (1 + i)ⁿ

principal = $500,000 / (1 + 0.000136986)¹⁰⁹⁵⁰ = $500,000 / 4.481228688 = $111,576.54