Question

Anthony is going to invest in an account paying an interest rate of 4.6% compounded monthly. How much would Anthony need to invest, to the nearest ten dollars, for the value of the account to reach $240,000 in 20 years?

Answer 1

The principal investment required to get a total amount of $240,000.00 from compound interest at a rate of 4.6% per year compounded 12 times per year over 20 years is $95,812.95.

Computation of Compound Interest

Given Data

Interest Rate r= 4.6%

Final Amount A =  $240,000

Time T = 20 years

Answer:

P = $95,812.95

Calculation Steps:

First, convert R as a percent to r as a decimal

r = R/100

r = 4.6/100

r = 0.046 per year,

Then, solve the equation for P

P = A / (1 + r/n)^nt

P = 240,000.00 / (1 + 0.046/12)^(12)(20)

P = 240,000.00 / (1 + 0.003833333)^(240)

P = $95,812.95

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