Calculating the required interest rate
If you have a certain financial goal in mind, such as saving a set amount of money by a set time, you can calculate what return will achieve this goal.
This is useful if, for example, you wanted to check if the goal you have set is realistic given current levels of interest rates.
Earlier, you saw that to retire in 30 years with USD 1,000,000 in the bank by investing USD 1,500 per month, you needed to earn an annual return of 3.77%. Calculate how much higher this return would need to be if you wanted to retire with USD 2,000,000 instead, again using monthly compounding.
This exercise is part of the course
Bond Valuation and Analysis in Python
Exercise instructions
- Import the
numpy_financialpackage using the aliasnpf. - Use the
npf.rate()function to calculate the required return and save this torequired_return. - Print the result.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Import the numpy_financial package using the alias npf
# Calculate return on investments required: required_return
required_return = ____
# Print the result