Question

I'm a little stuck on this, could I get some help? C:

How much would you need to deposit in an account each month in order to have $50,000 in the account in 10 years? Assume the account earns 5% annual interest compounded monthly.

Thank you, and I am eternally grateful.

Answer 1

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Answer:

$321.99

Explanation:

Use the annuity formula and solve for P.

A = P(12/r)((1 +r/12)^(12t) -1) . . . . value of a series of deposits P earning rate r compounded monthly for t years.

50,000 = P(12/0.05)((1 +0.05/12)^(12·10) -1) = P(240)(0.64700950)

P = 50,000/155.282279 = 321.99

You would need to deposit $321.99 in the account each month to have $50,000 in 10 years.