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GrogVix [38]
3 years ago
10

What initial investment must be made to accumulate $60000 in 17 years if the money is invested in a mutual fund that pays 12% an

nual interest, compounded monthly?
Mathematics
1 answer:
mars1129 [50]3 years ago
4 0

$7881.18

Step-by-step explanation:

   Let the initial Investment be P_{0}. The Interest is compounded on a monthly basis at 12% annual interest rate. After 17 years, the Investment amounts to $60,000.

   As the annual interest rate is 12%, the monthly interest rate is 1%.

Since this is a compound interest problem, the total amount can be modeled as follows: P(t)=P_{0}(1+\frac{i}{100})^{t}

Here i is the interest rate, i.e 1, and t is the number of time periods, i.e 17\textrm{ years x }12\frac{\textrm{months}}{\textrm{year}}= 204\textrm{ months}

60,000=P_{0}\textrm{ x }(\frac{101}{100})^{204}

P_{0}=7881.18

∴ Initial Investment = $7881.18

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