Question

Which investment should be made today to have $25,000 in an account if it is invested at 2.15% compounded monthly for 25 years?

Answer 1

Answer: The investment that should be made is $14612.2

Explanation:

To calculate the principle amount, for the interest compounded monthly follows:

$A=P(1+\frac{R}{n})^{nT}$

A = Amount after time period 'T' = $25,000

P = Principal amount = ?

R = rate of interest = 2.15 % = 0.0215

n = Number of times interest applied per time period = 12  ( 1 year = 12 months)

T = time period = 25 years

Putting values in above equation, we get:

$25,000=P(1+\frac{0.0215}{12})^{12\times 25}\\\\P=\ 14612.2$

Hence, the investment that should be made is $14612.2