Answer to Question #216736 in Financial Math for Kelly

Question

Find the lump sum deposit which will give $9,430 in 10 years in an account paying 1.24% compounded monthly. 

Answer 1

First, convert R as a percent to r as a decimal

$r = \frac{1.24}{100}\\ r = 0.0124$ rate per year,

$A = P(1 +\frac{ r}{n})^{nt}$

A = Accrued amount,P is the Principal ,r is annual nominal interest rate as a decimal,n is number of compounding periods per unit of time and t time in decimal years

$9430 = P\times(1 + \frac{0.0124}{12})^{(12)(10)}\\ 9430 = P\times(1.001033333)^{(120)}\\ 9430 =1.131943399P\\P=\frac{9430} {1.131943399}\\P=\$8330.81$