Mark is planning to retire in 20 years with a retirement fund of $500,000. He is also considering investing in an annuity that promises a 5% yearly return, compounded annually.

Future value needed: 500,000

Time: 20 years

Annual interest rate: 5%

Required:

1. Find out the amount of money Mark needs to invest now in order to achieve his retirement goal. If the annual return was only 3%, how much additional investment would he require?

2. What would be the required present value if the annual return decreased to 3%?