If you were left $50,000 from a relative's estate, what interest rate would you need to earn $1,000,000 in 30 years compounded daily?

Question

Answer the question by completing each box below.

Box 1 - Information

Box 2 - Find

Box 3 - Formula

Box 4 - Plug & Chug

Box 5 - Units

Answer 1

The underlying formula for compound interest that you want to use here is

A = P(1 + r/n)^(nt)

For this scenario that becomes

1,000,000 = 50,000(1 + r/365)^(365*30) and then we're trying to solve for the value of r algebraically!

20 = (1 + r/365)^(10950)

20^(1/10950) = 1 + r/365

0.000275816 = r/365

r = 0.1007 = 10.07%

meaning that you would need to earn an annual interest rate of around 10.07% in order to reach your goal

Answer 2

PY = $50000; FV = $1000000;t = 30 years = 10950 days; Find r% anual rate

FV PV(1 + r/n)^nt; 1000000 = 50000(1 + r/365)¹⁰⁹⁵⁰; 20 = (1 + r/365)¹⁰⁹⁵⁰; r = 365(20^1/10950 - 1) = 0.09987 =

9.987%