Question

If a savings account pays 7% p.a. interest rate, how much money do you need to deposit to accumulate $79545 in 9 years? Note that the bank will compound interest monthly.

Answer 1

Using Future value of sum formula , we can determine the amount of deposit required.
Future value of sum = P * (1+r)^n
Future value of sum = $79545
P = today's deposit amount = ?
r = rate of interest per month = 7%/12 = 0.005833
n = no.of months = 9 years * 12 = 108
79545 = P * (1+0.005833)^108
79545 = P * 1.874177
P = 42442.63
You need to deposit $42,443 today to accumulate $79,545 in 9 years.

answered by: anonymous