How much would you need to deposit in an account now in order to have 4000 in the account in 5 years? Assume the account earns 7% interest compounded monthly.

Solution

Solution

Principal : 2821.62

Solution steps

Translate the problem into an equation:

4000 = P (1 + \frac{0.07}{12})^{12 \cdot 5}

Solve for

P, 4000 = P (1 + \frac{0.07}{12})^{12 \cdot 5} : P = 2821.62

Principal : 2821.62

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