How much should be invested at 6% compounded monthly so that the investment will be worth $20,000 in six years?
Anna/Jenna -- please use the same name for your posts.
hahah sorry. No one was answering so I thought id try a different name
To find out how much should be invested at 6% compounded monthly to reach a value of $20,000 in six years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment ($20,000 in this case)
P = the principal amount we need to find
r = the annual interest rate (6% in this case, so r = 0.06)
n = the number of compounding periods per year (since it's compounded monthly, n = 12)
t = the number of years (6 years in this case)
Now, let's substitute the given values into the formula:
$20,000 = P(1 + 0.06/12)^(12*6)
To solve for P, we need to rearrange the formula:
P = $20,000 / (1 + 0.06/12)^(12*6)
Calculating this equation will yield the amount that needs to be invested at 6% compounded monthly in order to have a value of $20,000 in six years.