Question

Darius Miller is seeking to accumulate $50,000 in six years to invest in a real estate venture. He can earn 6.35 percent annual interest with monthly compounding in private investment. How much will he have to invest today to reach his goal? (Round to the nearest dollar.)

Answer 1

$34193

Step-by-step explanation:

Given :

Final amount, A = $50000

Interest, rate, r = 6.35% compounded monthly

Period, t = 6 years

n = number of compounding times per period, monthly = 12 times per period

Amount to be invested, P = principal

Using the relation :

A = P(1 + r/n)^n*t

50,000 = P(1 + 0.0635/12)^(12*6)

50000 = P(1 + 0.0052916)^72

50000 = P(1.0052916)^72

50000 = 1.4622779P

P = 50000 / 1.4622779

P = $34193.226

Amount to be invested today in other to have compounded $50000 in 6 years is $34193.226

To the nearest $ = $34193