Problema Solution
Determine the principal P that must be invested at rate r = 7%, compounded monthly, so that $500,000 will be available for retirement in t = 19 years. (Round your answer to the nearest cent.)
P = $
Answer provided by our tutors
P = the principal
t = 19 years
r = 0.07 or 7% annual rate
m = 12 compounding period per year
i = 0.07/12 interest rate per period
n = 19*12 = 228 total number of compounding periods
A = $500,000 future value
A = P(1 + i)^n
P = A/((1 + i)^n)
P = 500000/((1 + 0.07/12)^288)
P = $167,524.17