Question

In order to have 1 million dollars in 40 years with an annual interest rate of 11.6%, I will have to invest $_ (round to the nearest 1000) a 12,000 b 13,000 c 14,000 d 15,000

A.) 12,000

B.) 13,000

C.) 14,000

D.) 15,000

Answer 1

To solve the problem we use the compound formula given by:
A=p(1+r/100)^n
where:
A=future amount:
p=principle
r=rate
A=1000000, r=11.6%, n=40
plugging the value in the formula we get:
1000000=p(1+11.6/100)^40
solving for p we get:
1000000=80.6432p
p=12400.300
rounding to the nearest 1000 we get
p=$12000
Answer:
A.) 12,000