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Popular Word Problems >

How much would you need to deposit in an account now in order to have 5000 in the account in 15 years? Assume the account earns 2% interest compounded monthly. Round to the nearest cent.

Solution

Ho w m u c h w o u l d yo u n ee d t o d e p os i t in an a cco u n t n o w in or d er t o ha v e 5000 in t h e a cco u n t in 15 ye a rs ? A ss u m e t h e a cco u n t e a r n s 2% in t eres t co m p o u n d e d m o n t h l y . R o u n d t o t h e n e a res t ce n t .

Solution

Principal : 3705.02

Solution steps

Translate the problem into an equation:

5000 = P (1 + \frac{0.02}{12})^{12 \cdot 15}

Solve for

P, 5000 = P (1 + \frac{0.02}{12})^{12 \cdot 15} : P = 3705.02

Principal : 3705.02

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