Question 1100356
annual interest rate = 4.75% compounded monthly.
4.75% = .0475
.0475 / 12 = .0039583333 = monthly interest rate.
18 years * 12 = 216 months


formula is f = p * (1 + r) ^ n


f is the future value
p is the present value
r is the interest rate per time period (months in this case).
n is the number of time periods (months in this case).


in your problem.


f = 40,000
p = what you want to find
r = .0039583333
n = 216


formula becomes 40,000 = p * (1 + .0039583333) ^ 216


solve for p to get p = 40,000 / ((1 + .0039583333) ^ 216)


solve for p to get p = 17,040.0625


that's how much he would have to invest today so that he can have 40,000 in 18 years if he is able to invest it at 4.75% interest compounded monthly for 18 years.


here's some more financial formulas you might find useful.


<a href = "https://www.algebra.com/algebra/homework/Finance/THEO-2016-04-29.lesson#notes" target = "_blank">https://www.algebra.com/algebra/homework/Finance/THEO-2016-04-29.lesson#notes</a>