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How much must you invest at one time in order to accumulate 20000 in 15 years at 5 percent annual interest?
Wiki User
∙ 14y ago
It depends on how quickly / frequently the account compounds interest
The general equation for interest is this:
A = P(1 + r/n)^(nt)
Where A is the amount you will have at the end, P is how much you put in to begin with, r is the annual interest rate as a decimal. Also, n is the number of compounds per year and t is the number of years
You have given an A = 20,000
You have given a t = 15 years
You have given an r = 0.05 (or 5%) apr
You want to find P, but you havent given me an n yet
I will assume n=4. I make that assumption because that is very common. Most accounts compound four times a year. They call that "quarterly". Its a fair assumption. But if you want to be conservative try n=1, which is called "annually" and the account is compounded only once a year.
Given the equation:
A = P(1 + r/n)^(nt)
Plug in what we know.
20000 = P(1 + 0.05/4)^(4*15)
20000 = P(1.0125)^(60)
20000 / (1.0125)^(60) = P
I get P = 9,491.35205, approximately.
You will want to invest 9,491.36
Wiki User
∙ 14y ago
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