how much do you need to deposit in an account in order to have 4,000 in the account in 5 years at an 8% interest compounded monthly

Question

how much do you need to deposit in an account in order to have 4,000 in the account in 5 years at an 8% interest compounded monthly

Answer 1

Use the Future Value of Compound Interest formula where:

1. A = future amount (target: $4,000)
2. P = initial deposit (what we’re solving for)
3. r = annual interest rate (8%, or 0.08)
4. n = number of times the interest is compounded per year (12 for monthly)
5. t = time in years (5 years)

Rearrange the formula to solve for P and plug in the values (use a calculator).

You will find that you need to deposit approximately $2,684.84 in the account to have $4,000 in 5 years at 8% interest compounded monthly.

Hope this was helpful.