Question

As part of your retirement, you wish to generate $2,000 monthly payments for a 15-year period. The annual interest rate is 5%. What minimum amount is necessary to fund these payments?

Answer 1

$962.0

Explanation:

The formula for amount is ;

`A=P(1+\frac{r}n} )^(nt)`

where

A= amount at the end of the period= $2000

P=minimum amount necessary to fund the payments

r= annual interest rate = 5% = 0.05

n= number of compounding per year , 1

t= time period = 15 years

Applying the values to the formula as;

`2000=P(1+(0.05)/(1) )^(1*15) \\\\\\2000=P(1.05)^(15) \\\\\\2000/2.079=P\\\\\\962.0=P`