ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Bob and Sue want to save a total of $500, 000 for retirement. How much should they deposit monthly into an account that pays 4.5% interest, compounded monthly, to meet their goal in 25 years?
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$162, 668.00
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$1, 626.68
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$162.66
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$106, 668.00
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Explanation:
Detailed explanation-1: -Most competitive money market accounts offer APYs between 1.6% and 1.8%. A 1.8% APY would mean you earn $9, 074.62 in the first year after depositing $500, 000.
Detailed explanation-2: -You would need to deposit $7007.08 to have $12000 in 6 years.
Detailed explanation-3: -The future value of $500 one year from today if the interest rate is 6 percent is $530.
Detailed explanation-4: -FAQs on Monthly Compound Interest Formula The formula of monthly compound interest is: CI = P(1 + (r/12) )12t-P where, P is the principal amount, r is the interest rate in decimal form, and t is the time.
There is 1 question to complete.