SOLUTION: Omar will need $25,000 in 12 years for new machinery for his shop. How much should he invest now at 4.5% annual interest, compounded monthly, to reach his goal?
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Question 1150518: Omar will need $25,000 in 12 years for new machinery for his shop. How much should he invest now at 4.5% annual interest, compounded monthly, to reach his goal? Answer by ikleyn(52776) (Show Source):
Formula for discretely compounded account is f =
where f is the future value
P is the present value
r is the interest rate per time period
n is the number of time periods.
Your time periods are in months.
p is unknown under the question.
r = 4.5% / 12 = 0.045/12.
n = 12 years * 12 = 144 months (time periods).
Formula becomes 25000 = .
From the formula, the required investment is P = = 14583.43 dollars. ANSWER
