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Omar wants to open an account for his grandchildren that he hopes will have $80,000 in it after 20 years. How much must he deposit now into an account that yields 1.75% interest, compounded monthly, so he can be assured of reaching his goal?

 Oct 30, 2018

Best Answer 

 #1
avatar+17338 
+2

1.75 % annual interest is   .0175/12 = .001458333 % monthly (periodic) interest

20 years = 240 periods (months)

 

FV = 80 000   (future value)

PV = amount to deposit

 

FV = PV (1+i)^n         n= periods (240)

 

80000 = PV (1.001458333)^240

PV = $ 56,389.42

 Oct 30, 2018
 #1
avatar+17338 
+2
Best Answer

1.75 % annual interest is   .0175/12 = .001458333 % monthly (periodic) interest

20 years = 240 periods (months)

 

FV = 80 000   (future value)

PV = amount to deposit

 

FV = PV (1+i)^n         n= periods (240)

 

80000 = PV (1.001458333)^240

PV = $ 56,389.42

ElectricPavlov Oct 30, 2018
 #2
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+1

Sorry EP. Didn't see you working on it.

 Oct 30, 2018
edited by Guest  Oct 30, 2018
 #3
avatar+17338 
+1

No problem.....multiple answers are always good to see other perspectives and ways to solve....and to keep us all honest! cheeky

ElectricPavlov  Oct 30, 2018

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