Question

How much would you need to deposit in an account now in order to have $5000 in the account in 15years? Assume the account earns 8% interest compounded monthly.$

Answer 1

A(t) = amount in t years

P = Principal (original investment)

r = annual interest rate (in decimal form)

n = number of times that interest is compounded each year

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

Substitute in the given values:

`5000=P(1+(0.08)/(12))^(12*15)`
`5000=P(1.0067)^{180^{}}`
`5000=P*3.307`
`P=1511.94`

Hence the amount need to deposit is 1511.94 dollar.