You have decided that you want to be a millionaire when you

You have decided that you want to be a millionaire when you retire in 44 years. Requirement 1: If you can earn an annual return of 11.3 percent, how much do you have to invest today? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Investment Requirement 2: What if you can earn an annual return of 5.65 percent? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Solution

PV = FV/(1 +r)

                      PV = 1,000,000/(1+0.113)⁴⁴

                            = 1,000,000/(1.113) ⁴⁴

                          = 1,000,000/111.12

                          = $ 8,999.38

                  You haver to invest $ 8,999 today.

                    Investment = $ 8,999

2. Annual return = 5.65 %

PV = FV/(1 +r)

                        PV = 1,000,000/(1+0.565)⁴⁴

                        = 1,000,000/(1.565) ⁴⁴

                         = 1,000,000/11.2268

                             = $ 89,072.15

                  You have to invest $ 89,072 today.

                   Investment = $ 89,072