Question

Jane wishes to have 20,000 available at the end of 10 years so she deposit money into an account that pays 1.14% compounded monthly how much does she need to deposit in order to meet this goal?

Answer 1

`\$17,846.12`

Explanation:

we know that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=10\ years\\ A=\$20,000\\ r=0.0114\\n=12`

substitute in the formula above

`\$20,000=P(1+(0.0114)/(12))^(12*10)`

`P=\$20,000/[(1+(0.0114)/(12))^(120)]`

`P=\$17,846.12`