Question

Solve by using proper methods. Show your work.

Determine the principal P that must be invested at 7%, compounded monthly, so that $200,000 will be available for retirement in 15 years?

Answer 1

Answer:

$70,201.38

Step-by-step explanation:

To determine the principal amount, we can use the formula:

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

A = $200,000

r = 7% or 0.07

t = 15 years

n = 12

Now let's substitute our values.

$P=\dfrac{200,000}{(1+\frac{0.07}{12})^{12(15)}}$

$P=\dfrac{200,000}{(1.00583333333)^{12(15)}}$

$P=70,201.38$

So the principal needed to get 200,000 in 15 years is $70,201.38.