Problema Solution
How much money would need to be deposited into an account earning 5.25% interest compounded annually in order for the accumulated value at the end of 25 years to be $75,000?
Answer provided by our tutors
P = the principle
i = 5.25% or 0.0525
A = $75,000 the future value
t = 25 years
A = P(1 + i)^t
P(1 + i)^t = A
P(1 + 0.0525)^25 = 75000
by solving we find:
P = $20,869.34
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$20,869.34 need to be deposited.