Question

How much money would need to be deposited into an account earning 5.75% interest compounded annually in order for the accumulated value at the end of 25 years to be $85,000?

Answer 1

I will assume you are using compound interest.

let the amount invested be x

x(1.0575)^25 = 85000
x = 85000/1.0575^25 = $21,009.20

Answer 2

The money that would need to be deposit into the account is $21009.44

Explanation:

Given: Interest = 5.75% compounded annually

Amount = $ 85,000

Times period = 25 years

We have to calculate the money that would need to be deposit into the account.

We know the formula for compound interest

`A=P(1+(r)/(100))^n`

Where, A is amount

P is principal amount

n is time

r = rate of interest

Thus, Substitute, we get,

`85000=P(1+(5.75)/(100))^25`

Solving for P,

`\left(1+(5.75)/(100)\right)^(25)=4.0458(approx)`

Divide both side by 4.0458, we get,

`P=(85000)/(4.0458)=21009.44`

Thus, the money that would need to be deposit into the account is $21009.44