Question

a metal plating company wants to set aside money now to prepare for a lawsuit it expects to face in four years. if the company wants to have $1,000,000 available at that time, how much must it set aside now in one lump sum if the account will earn 1% per month?

Answer 1

To set aside $1,000,000 in four years with 1% interest per month, the metal plating company needs to set aside approximately $826,519.72 now.

Step-by-step explanation:

To calculate the amount of money that needs to be set aside now, we can use the formula for compound interest. The formula is:

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

Where:
A is the future amount, which is $1,000,000
P is the present amount we need to find
r is the interest rate per period, which is 1%
n is the number of periods, which is 4*12 (since there are 12 months in a year) = 48 months

Substituting these values into the formula:

1,000,000 = P(1 + 1/100)^48

Simplifying the equation:

P = 1,000,000 / (1 + 1/100)^48

P ≈ $826,519.72

Therefore, the metal plating company needs to set aside approximately $826,519.72 in one lump sum now.