Hard math problem - XP Math - Forums

 XP Math - Forums Hard math problem

 12-14-2011 #1 moralvirus   Join Date: Dec 2011 Posts: 1 Hard math problem A wealthy relative has passed away and left an inheritance of \$200,000 to you, which you will receive exactly three years from today. You plan to retire in 23 years, and you will invest this \$200,000 wisely, beginning on the day you receive the funds, earning 7% per year until then. a) What is the present value today of this inheritance assuming interest rates are currently 5%? b) What will your retirement fund be worth on the day you retire? c) If your life expectancy is 86 years, and you are 40 years old today, what amount will you be able to draw out each year in your retirement? Assume an interest rate during retirement years of 5%, and ignore taxes and the payment is at the end of the year.
02-01-2012   #2

Join Date: Dec 2011
Posts: 90

Quote:
 Originally Posted by moralvirus A wealthy relative has passed away and left an inheritance of \$200,000 to you, which you will receive exactly three years from today. You plan to retire in 23 years, and you will invest this \$200,000 wisely, beginning on the day you receive the funds, earning 7% per year until then.

Quote:
 Originally Posted by moralvirus b) What will your retirement fund be worth on the day you retire?
To answer this, it depends on whether it is simple or compound.
If it is simple:
200,000 x 0.07 x (23 - 3) = \$280000 extra obtained from investment. Therefore:
280000+200000 = \$480,000 retirement fund.

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