You would like to have enough money saved to receive $150,000 per year perpetuity after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal

The amount you would need to save  in your retirement fund to achieve this goal is $2,500,000.

Using this formula

Present value =Annual cash flows per year ÷ Interest rate

Where:

Annual cash flows per year=$150,000

Interest rate=10% or 0.10

Let plug in the formula

Annual cash flows per year = $150,000 ÷ 0.06

Annual cash flows per year = $2,500,000

Inconclusion the amount you would need to save  in your retirement fund to achieve this goal is $2,500,000.

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$2,500,000

Explanation:

The computation of the saving amount is shown below

The Present value of a perpetuity is

= Annual cash flows ÷ interest rate

= $150,000 ÷ 0.06

= $2,500,000

By dividing the annual cash flows from the rate of interest we can get the present value of a perpetuity and the same is to be considered

We simply applied the above formula so that the correct value could come

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