In Example 9.1, an investment plan for retirement was introduced. It involved investing $8000/year for 40 years leading to retirement. The plan then provided $106,667/year for 20 years of retirement income.

1. What yearly interest rate was used in this evaluation?

2. How much money was invested in the retirement plan before withdrawals began?

Example 9.1

Upon graduation, you start your first job at $80,000/y. You decide to set aside 10%, or $8000/y, for retirement in 40 years’ time, and you assume that you will live 20 years after retiring. You have been offered an investment that will pay you $106,667/y during your retirement years for the money you invest.