Question

Take a look at Table 21-1. Suppose that you are planning your retirement. The appropriate interest rate for computing the present values of future dollars to be received is 8 per cent, and you plan to "cash in" all of what you save for retirement this year in exactly 30 years. How many dollars would you have to save this year to ensure being able to have a total of $50,000 accumulated 30 years from now?

Short answer

$\$1799.85$

Step-by-step solution

Given Information

Discounted value is characterized as the ongoing worth of a future amount of cash, the future amount of cash is limited at the rebate rate. Contingent on the rebate rate current worth of a future amount of cash might increment or diminish.

Explanation

The limited or present worth is the ongoing worth of a specific future amount of cash. The ongoing worth of a future amount is determined based on the markdown rate so the ongoing worth representing things to come amount of cash relies on the rebate rate. Assuming the rebate rate is low the current worth will be additionally low.

We have,

Amount = $\$5000$

Time = $30yrs$

$\Rightarrow \frac{50000}{30}=1666.66$

Now, the discount rate for the first year is $0.926$

$=\frac{1666.66}{0.926}=1799.85$

Hence$\$1799.85$has to be saved.