Question

How much do we need to invest each year at a rate of 8% compounded annually so that we have a total of $600,000 saved in 25 years?

Answer 1

In this problem, we have to use the formula

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

A = $600,000.00

n = 1 (annually)

t = 25 years

First, convert R as a percent to r as a decimal

r = R/100

r = 8/100

r = 0.08 per year,

Then, solve the equation for P

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

`P= (6000000)/((1+(0.8)/(1))^(1*25) )`

P = $87,610.74

The principal investment required to get a total amount of $600,000.00 from compound interest at a rate of 8% per year compounded annually over 25 years is $87,610.74.