Question

How much money must you set aside at age 40 to accumulate retirement funds of $100,000 at age 65, assuming a rate of interest of 7 percent?

Answer 1

Answer:

$18,424.92

Step-by-step explanation:

Assuming this is compound interest, we'll have to use this formula

A = P(1 + r)ⁿ

A = Final amount (100,000)

P = Starting amount (?)

r = Rate (.07)

n = Years (?)

65 - 40 = 25

This means you will save for 25 years, making n = 25

So far, our equation looks like this: 100,000 = P(1.07)²⁵

To isolate the variable, P, divide both sides by 1.07²⁵

100,000/1.07²⁵ = P(1.07)²⁵/1.07²⁵

P = 18,424.917752223962

You would need to set aside around $18,424.92 if you want to accumulate $100,000 in 25 years with 7% compound interest rate.