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Popular Word Problems >

How much would you need to deposit in an account now in order to have 4000 in the account in 15 years? Assume the account earns 4% interest compounded monthly.

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 4000 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 4% in t eres t co m p o u n d e d m o n t h l y .

Solution

Principal : 2197.44

Solution steps

Translate the problem into an equation:

4000 = P (1 + \frac{0.04}{12})^{12 \cdot 15}

Solve for

P, 4000 = P (1 + \frac{0.04}{12})^{12 \cdot 15} : P = 2197.44

Principal : 2197.44

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