Question 519899: Determine the principal P that must be invested at rate r, compounded monthly, so that $500000 will be available for retirement in t years.
r=7.5%, t=20
Answer by lwsshak3(11628)   (Show Source):
You can put this solution on YOUR website! Determine the principal P that must be invested at rate r, compounded monthly, so that $500000 will be available for retirement in t years.
r=7.5%, t=20
**
compound interest formula: A=P(1+r)^t, P= initial investment, r=interest rate/period,
t=number of periods, A=amount after t periods.
..
For given problem:
A=500000, r=.075/12=.00625, t=12*20=240
..
500000=P(1+.075/12)^12*20
P=500000/(1+.00625)^240
=500000/(1.00625)^240
=$112,087.09
ans:
The principal that must be invested=$112,087.09
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