Given that you can earn 3% return per year with inflation running at 4% per year

Question

Given that you can earn 3% return per year with inflation running at 4% per year, how much would you have to deposit today if you wanted to collect the equivalent of $1,000,000 in today

Given that you can earn 3% return per year with inflation running at 4% per year, how much would you have to deposit today if you wanted to collect the equivalent of $1,000,000 in today's actual dollars 30 years from today? Also, explain why you need to deposit more or less than $1,000,000 today to receive the equivalent of that amount in 30 years.

Explanation / Answer

amount to be deposited is 1000000 * 1.04^30 / 1.03^30 = $1,336,236.83

The amount to be deposited is greater than 1,000,000 because the inflation is higher than the rate of return earned

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