What initial investment must be made to accumulate $120000 in 12 years if the money is invested in a mutual fund that pays 14%
annual interest, compounded monthly?
Remember that
The compound interest formula is equal to
[tex]A=P(1+\frac{r}{n})^{nt}[/tex]where
A is the Final Investment Value
P is the Principal amount of money to be invested
r is the rate of interest in decimal
t is Number of Time Periods
n is the number of times interest is compounded per year
in this problem we have
A=$120,000
t=12 years
r=14%=14/100=0.14
n=12
substitute in the given formula
[tex]120,000=P(1+\frac{0.14}{12})^{12\cdot12}[/tex]Solve for P
