Question

Approximately how much principal would need to be placed into an account earning 1.58% interest compounded monthly so that it has an accumulated value of $90,597 at the end of 25 years?

Answer 1

The initial investment is $821.58

Explanation:

Giving the following information:

Future Value (FV)= $90,597

Number of periods (n)= 25*12= 300

Interest rate (i)= 1.58% = 0.0158

To calculate the initial investment, we need to use the following present value (PV) formula:

PV= FV/(1+i)^n

PV= 90,597 / (1.0158^300)

PV= $821.58

The initial investment is $821.58