Question 997954
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An investor needs $18000 in 20 years; a finance company is offering 6% compounded monthly. 
How much should they invest now?
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        In his post, @lwsshak3 incorrectly read the problem - so, his numbers in calculations are irrelevant

        to the problem and his answer is incorrect.


        I came to provide a correct solution.



compound interest formula: A = {{{P(1+r/n)^(nt)}}}, where


P = initial investment 
r = interest rate, 
n = number of compounding periods per year, 
A = amount after t years


For given problem:
P = ?
r = 0.06
n = 12
t = 20
A = 18000


18000 = {{{P(1+.06/12)^(12*20)}}}


18000 = {{{P(1+.005)^240}}} = {{{P(1.005^240)}}}.


P = {{{18000/1.005^240}}} = 5437.730549


How much should they invest now ? $5437.73 rounded to the closest cent.    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ANSWER</U>


Solved correctly.