Question 316660
How much money should be deposited today in an account that earns 10.5% compounded monthly so that it will accumulate to $22,000 in four years?
.
Compound interest formula:
{{{A = P(1 + i/n)^(nt)}}}
Where
A is amount after time t
P is the principal
i is the interest
n is number of times compounded
t is time (in years)
.
{{{A = P(1 + i/n)^(nt)}}}
Plugging in what was given:
{{{22000 = P(1 + .105/12)^(12*4)}}}
{{{22000 = P(1 + .105/12)^48}}}
{{{22000 = P(1 + .00875)^48}}}
{{{22000 = P(1.00875)^48}}}
{{{22000/(1.00875)^48 = P}}}
{{{22000/(1.00875)^48 = P}}}
$19,816.19 = P