A mutual fund pays 10% compounded monthly. How much should I invest now so that 3 years from now I will have $4700 in the account?

Answer 1

The formula you're looking for is monthly interest. This would be P(1 + ^r/₁₂)^12t. We can plug in r=0.1 and t=3 years; this will tell us by what factor our principal has increased. Plugging all this into a calculator, we get P*1.348182 which we can now set equal to 4700. So P = $4700/1.348182 = $3486.18. This means if you want to have $4700 in the account 3 years later, you would need to invest $3486.18 in the account now.