Question

How much should be invested each month at 10% for it to accumulate to $7,000 in 4 years

Answer 1

To accumulate $7,000 in 4 years at a 10% interest rate, approximately $162.48 should be invested each month.

Step-by-step explanation:

To calculate the amount that should be invested each month, we can use the formula for the future value of an ordinary annuity:
FV = P * [(1+r)^n - 1] / r

Where:
FV = Future value of the annuity
P = Monthly payment
r = Interest rate per period
n = Number of periods

For this problem, we want to accumulate $7,000 in 4 years at an interest rate of 10% per year. We can plug these values into the formula:

$7,000 = P * [(1+0.10)^4 - 1] / 0.10

Solving for P:

P = $7,000 * 0.10 / [(1+0.10)^4 - 1]

P = $7,000 * 0.10 / (1.10^4 - 1)

P ≈ $162.48

Therefore, approximately $162.48 should be invested each month to accumulate $7,000 in 4 years at a 10% interest rate.