Question

Find the principal P that must be invested at rate r, compounded monthly, so that $1,000,000 will be available for retirement in t years. (Round your answer to the nearest cent.)r

Answer 1

$224,174

Step-by-step explanation:

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The Principle P that is required can be calculated from the given data though discounting future cash flows as follows :

FV = $1,000,000

r = 7½%

t = 20 × 12 = 240

P/yr = 12

Pmt = $0

PV = ?

Using a Financial Calculator to input the values as shown above, the PV would be $224,174 . Thus, the principal P that must be invested must be $224,174.