Frugality is a key reason people become millionaires. They found that the average millionaire drove used cars, did not inherit their wealth and lived well below their means. If you believe you need $3 million to retire, how long will it take you to achieve this milestone if you save $5,000 per year at a 9% rate of return?
Finance authors believe you should save at least 10% of your income with many authors suggesting you try to save 20% of your income. Given this you decide you can do better than $5,000 per year and begin saving twice as much or $10,000 per year. How many years will it take you to save $3 million saving this much while earning 9%?
You decide you will only need $2.5 million in retirement since you will have no annual mortgage or rental expense. So, if you save $10,000 per year, how long will it take you to save $2.5 million if you can earn 9% each year?
How much would you pay for a stock that paid a $2 dividend recently and whose dividend is expected to grow 5% in perpetuity. If your required rate of return is 10%, what is an appropriate price for this stock?