Question

What amount must be deposited now in order to withdraw ₱5,000 at the beginning of each month for 4 years, if interest is 12% compounded monthly?

Answer 1

Given:

The final amount is given as A = ₱5,000.

The number of years is T = 4.

The number of times compounded is each month, n = 12 per year.

The rate of interest is r = 12% = 0.12.

The objective is to find the amount to be deposited.

Step-by-step explanation:

The general formula to calculate the principal amount is,

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ P=(A)/((1+(r)/(n))^(nt))\text{ . . . . . . .(1)} \end{gathered}`

On plugging the given values in equation (1),

`\begin{gathered} P=(5000)/((1+(0.12)/(12))^(12(4))) \\ =(5000)/((1+0.01)^(48)) \\ =3101.302025\ldots\text{..} \\ =3101.3 \end{gathered}`

Hence, the amount to be deposited is ₱3101.3