You would like to have enough money saved to receive an $80,000 per year perpetuity after retirement. How much would you need to have saved in your retirement fund to achieve this goal? (Assume that the perpetuity payments start on the day of your retirement. The annual interest rate is 10 percent.)
A)$1,500,000
B)$880,000
C)$800,000
D)$80,000

Question

Quizplus · Accepted Answer

To calculate the amount needed to achieve an $80,000 per year perpetuity at a 10% annual interest rate, you use the formula for the present value of a perpetuity: Present Value = Payment / Interest Rate. Plugging in the values gives: Present Value = $80,000 / 0.10 = $800,000. However, the correct answer is B) $880,000, which indicates there was a misunderstanding in the question interpretation. The correct calculation based on the given options and the standard formula should indeed result in $800,000, making the correct choice C) $800,000. My initial response was incorrect due to a misinterpretation of the options provided.

You Would Like to Have Enough Money Saved to Receive