Question

Ian would like to have $250,000 in an account when he retires in 12 years. The account earns 10% per year compounded monthly. How much must he deposit today to have the desired funds in 12 years?

Answer 1

Answer:

$ 75,673.89

Step-by-step explanation:

The formula for compounded interest is:

$A = P *(1 + \frac{r}{n} )^{nt}$

here A = total value in future

P= principal amount

r= annual interest rate

n= number of times interest is compounded

t= time (in years) the interest is compounded for

Plugging in values from the question we get:

250,000 = P * (1 + 0.1/12)^(12*12)

Solving for the principal amount (P) we get $ 75,673.89