Ask questions and get helpful answers.

You wish to deposit an amount now that will accumulate to $100,000 in 10 years. How much less would you have to deposit if the rate of interest was 8% compounded monthly versus annually?

So ive tried doing this question but I cant seem to get the final answer which is supposed to be $1267. Im using my financial calculator to solve the question but I have no idea how to do this question. I know we are solvin for pv (present value) but Im not getting the answer. Ive looked through my notes and we dont have any question worded like this. help please

  1. 👍
  2. 👎
  3. 👁
  4. ℹ️
  5. 🚩

1 answer

  1. Po(1+r)^n = 100,000.
    r = 0.08/12 = 0.00666667 = monthly % rate.
    n = 1comp./mo * 120mo, = 120 compounding periods.

    Po(1.00666667)^120 = 100,000.
    Po = $45,052.33 = initial dep.

    Po(1+r)^10 = 100,000.
    Po(1.08)^10 = 100,000.
    Po = $46,319.35.

    46,319.35 - 45,052.33 = $1267.02. Less.

    1. 👍
    2. 👎
    3. ℹ️
    4. 🚩

Answer this Question

Related Questions

Still need help?

You can ask a new question or browse existing questions.