Question

you want to have $2 million in real dollars in an account when you retire in 40 years. the nominal return on your investment is 10 percent and the inflation rate is 4.1 percent. what real amount must you deposit each year to achieve your goal? (do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

The real amount that must deposit each year to achieve your goal is $ option (a)$20,403 is correct.

What is invested amount?

An investment is a payment made to acquire the securities of other firms with the intention of making a profit.

First, we will calculate the real rate of interest:

r = [(1+nominal rate)/(1+inflation rate)] - 1

Nominal rate = 10% = 0.1

Inflation rate = 4.1% = 0.041

r = [(1+0.1)/(1+0.041)] - 1

After calculating,

r = 0.141 or 14.1%

Deposit amount each year:

Future value = PV[(1+r)ⁿ - 1]/(r)

2000000 = PV[(1+0.141)⁴⁰- 1]/(0.0653)

PV=   $20,403.

Learn more about the invested amount here:

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