Question

2 How much would you need to invest in a money market account if you would like to have $20,000 in the account at the end of 10 years? The account provides an APR of 2% compounded monthly.​

Answer 1

• $16377.34

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Use the compound interest formula:

• A = P(1 + r/n)^(nt),

Where A - future amount, P - invested amount, r- annual interest rate, n - number of compounds a year, t - number of years

Given:

• A = $20000,
• r = 2% = 0.02
• n = 12,
• t = 10.

Substitute known values and solve for P:

• 20000 = P(1 + 0.02/12)^(12*10)
• P = 20000/(1 + 0.01/6)^120
• P = 16377.34