Question

Solve by using proper methods. Show your work.

Determine the principal P that must be invested at 7%, compounded monthly, so that $200,000 will be available for retirement in 15 years?

Answer 1

$70,201.38

Explanation:

To determine the principal amount, we can use the formula:

`P=(A)/((1+(r)/(n))^(nt))`

A = $200,000

r = 7% or 0.07

t = 15 years

n = 12

Now let's substitute our values.

`P=(200,000)/((1+(0.07)/(12))^(12(15)))`

`P=(200,000)/((1.00583333333)^(12(15)))`

`P=70,201.38`

So the principal needed to get 200,000 in 15 years is $70,201.38.