Question

john wishes to set up an account for his grandfather so that he can have some extra money each month. john wants his grandfather to be able to withdraw $120 per month for the next 4 years. how much must john invest today at 4% per year compounded monthly so that his grandfather can withdraw $120 per month for the next 4 years?

Answer 1

John must invest $4,893.80, so that his grandfather can withdraw $120 per month for a period of 4 years using formual of compound interest.

Calculation:

According to the question grandfather should be able to withdraw money for next 4 years per month,

No. of months in a year = 12

No. of months in 4 years = 12*4 = 48

Time period (n) = 48

Rate of interest compounded monthly (i) = 4% =0.04/12 = 0.0034

Total amount that Grandfather will withdraw over a span of 4 years= $120*48 = $5,760

Using formula of compound interest,

Amount = Principal (1+i) ^n

$5,760 = Principal (1+0.0034) ^48

$5,760 = principal (1.177)

Principal = $5,760/1.177 = $4,893.80

The interest earned on savings that is computed using both the original principal and the interest accrued over time is known as compound interest. The yearly interest rate is increased to the amount of compounded times minus one, and the starting principal amount is multiplied by these two factors. The obtained value is subsequently deducted from of the loan's entire original amount.

Learn more about compound interest here:

https://brainly.com/question/14295570

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Answer 2

John must invest $4,893.80, so that his grandfather can withdraw $120 per month for a period of 4 years using formula of compound interest.

Calculation:

According to the question grandfather should be able to withdraw money for next 4 years per month,

No. of months in a year = 12

No. of months in 4 years = 12*4 = 48

Time period (n) = 48

Rate of interest compounded monthly (i) = 4% =0.04/12 = 0.0034

Total amount that Grandfather will withdraw over a span of 4 years= $120*48 = $5,760

Using formula of compound interest,

Amount = Principal (1+i) ^n

$5,760 = Principal (1+0.0034) ^48

$5,760 = principal (1.177)

Principal = $5,760/1.177 = $4,893.80

The interest earned on savings that is computed using both the original principal and the interest accrued over time is known as compound interest. The yearly interest rate is increased to the amount of compounded times minus one, and the starting principal amount is multiplied by these two factors. The obtained value is subsequently deducted from of the loan's entire original amount.

Learn more about compound interest here:

brainly.com/question/14295570

#SPJ4