Suppose that your child is born this year, and that you would like to set aside enough money now so that your child will have $3000000 at retirement in 20 years.

A) if return of return on your money averages 5% per year over the next 70 years, how much do you have to invest today so that your child will have $3000000 in 70 years

B) suppose that your child decides to retire at the age of 50 instead, how much money will there be based on the assumption and answers from part A above?

1 answer

A*1.05^70 = 3000000
now take logs and solve for logA

or, A = 3000000/1.05^70
= (3000000^(1/70)/1.05)^70