Posted by **Sally** on Wednesday, February 29, 2012 at 11:25pm.

You want to have 1.5 million in real dollars in an account when you retire in 40 yeras. the nominal return on your investment is 11 percent and the inflation rate is 3.8 percent. What real amount must you deposit each year to achieve your goal?

My answer is this correct:

real interest rate = 6.94%

FV = 1.5 million

N = 40 yrs

pmt = $7,630.72

Real amount each month is $7,630.72

- Math -
**Nick**, Monday, December 3, 2012 at 6:05pm
Real rate = 11-3.8

= 7.2%

1,500,000/(1+0.072)^40= 92960.80

To check this is correct you can do:

92960.80*(1+0.072)^40= 1,500,000

- Math -
**n**, Sunday, March 9, 2014 at 11:52pm
edfd

- Math -
**Amanda**, Friday, November 21, 2014 at 1:21am
you need to use the Fisher formula to find the real interest rate

1+R=(1+r)x(1+h)

where R=11%nominal rate

h=3.8%inflation

and r= the real interest rate

1+.11=(1+r)x(1+.038)

r=6.94% =I/Y

N=40

PV=0

FV=1.5million

PMT=7630.72

## Answer this Question

## Related Questions

- Finance - You want to have $5 million in real dollars in an account when you ...
- business - You want to have $6 million in real dollars in an account when you ...
- business - You want to have $6 million in real dollars in an account when you ...
- finance - You want to have $2 million in real dollars in an account when you ...
- Math - Real Reverse Nominal Returns You purchase 100 shares of stock for $40 a ...
- Math - Real Versus Nominal Returns. The Costaguanan stock market provided a rate...
- Math - Real Versus Nominal Returns. The Costaguanan stock market provided a rate...
- math problem - Real Versus Nominal Returns. A foreign stock market provided a ...
- Economics - If the velocity of circulation is constant, real GDP is growing at 3...
- Real reverse Nominal Returns - You purchase 100 shares of stock for $40 a share...

More Related Questions