You want to have $600,000 when you retire in 20 years. If you can earn 3% interest compounded monthly, how much would you need to deposit now into the account to reach your retirement goal?
Which formula do I use and how do I set it up?
https://www.thecalculatorsite.com/articles/finance/compound-interest-formula.php
Thank you!
You're welcome.
What if you're trying to figure out the principle?
let r = percent per year divided by 100*periods per year
each period the amount is increased by a certain multiplier.
like if 24% per year and monthly so 12 periods per year
then
r = 24%/(100*12) = 0.02
then multiply by (1+ r) each period
like when r = 0.02
multiply by (1.02) every period (month in this case)
if for five years then multiply principal by 1.02 sixty times
or by
(1.02)^60 = 3.28 about
SO in this case
final amount = original principal * 3.28
that is the PRINCIPLE behind finding the PRINCIPAL
Same formula, you just substitute in a different place
that is, ....
rate = .03/12 = .0025
600,000 = initial(1.0025)^240
solve for "initial"
Thanks everyone! I got it solved!
To calculate the amount you would need to deposit now to reach your retirement goal of $600,000 in 20 years with a 3% interest rate compounded monthly, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan, which in this case is $600,000.
P = the initial deposit or principal amount we want to find.
r = the annual interest rate, which is 3% or 0.03 as a decimal.
n = the number of times interest is compounded per year, which is monthly, so it is 12.
t = the number of years, which is 20.
By substituting these values into the formula, we get:
$600,000 = P(1 + 0.03/12)^(12*20)
Now, to find the value of P, we need to isolate it on one side of the equation. We can simplify the formula first by dividing both sides by (1 + 0.03/12)^(12*20):
$600,000 / (1 + 0.03/12)^(12*20) = P
Using a calculator, we can evaluate the right side of the equation to find the value of P.