SOLUTION: How long will it take to save $12500 by making deposits of $90 at the end of every month into an account earning interest at %3.9 compounded annually
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Question 1195829: How long will it take to save $12500 by making deposits of $90 at the end of every month into an account earning interest at %3.9 compounded annually
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
normally, deposits monthly uses interest rate compounded monthly.
you asked for 3.9% compounded annually.
that means your effective interest rate is 3.9% per year.
that means your effective growth factor is 1.039 per year.
the equivalent monthly growth factor is (1.039)^(1/12) = 1.003193314 per month.
that means your equivalent monthly growth rate = .3193314% per month.
that ^ 12 = 1.039, which matches your effective annual growth factor.
using the calculator at https://arachnoid.com/finance/, i get the following.
inputs are all fields except np.
output is np = 115.14.
divide that by 12 to get 9.595 years.
note that, if the annual growth rate was compounded monthly, then the monthly growh rate would be 3.9/12 = .325%
that's slightly higher than .3183314/% per month which will require slightly less number of months to get to the same future value of 12500.
results are shown below:
once again, inputs are all fields except np.
output is np = 114.81 months.
divide that by 12 to get 9.5675 years.
assuming 3.9% per year compounded annually, your solution is 115.14 months or 9.595 years.
let me know if you have any questions.
theo
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