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Popular Word Problems >

You want to have 800,000 when you retire in 30 years. If you can earn 7% interest compounded continuously, how much would you need to deposit now into the account to reach your retirement goal?

Solution

Y o u w an t t o ha v e 800, 000 w h e n yo u re t i re in 30 ye a rs . I f yo u c an e a r n 7% in t eres t co m p o u n d e d co n t in u o u s l y, h o w m u c h w o u l d yo u n ee d t o d e p os i t n o w in t o t h e a cco u n t t o re a c h yo u r re t i re m e n t g o a l ?

Solution

Principal : 97965.14

Solution steps

Translate the problem into an equation:

800000 = P e^{0.07 \cdot 30}

Solve for

P, 800000 = P e^{0.07 \cdot 30} : P = 97965.14

Principal : 97965.14

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