20.2k views
4 votes
How much money should Be deposited today in an account that earns 10.5 percent compounded monthly so that it will accumulate to $22,000 in four years

User Povilasp
by
7.7k points

2 Answers

4 votes
We can use the formula for compound interest to solve this problem:

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

where A is the future value, P is the present value, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years.

In this case, we want to find the present value P that will accumulate to $22,000 in four years at an annual interest rate of 10.5% compounded monthly (i.e., n = 12). Therefore, we have:

A = $22,000
r = 0.105/12 (monthly interest rate)
n = 12
t = 4

Substituting these values into the formula and solving for P, we get:

P = A/(1 + r/n)^(nt) = $22,000/(1 + 0.105/12)^(12*4) ≈ $14,005.70

Therefore, the amount that should be deposited today in the account is approximately $14,005.70.
User MarkSouls
by
7.9k points
5 votes

Answer:

$12,276.24

Explanation:

22000 / (1 + 0.105/12)^4*12

12276.24

User Padu Merloti
by
7.3k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.