Suppose you want to have $ 749,791 for retirement in 13 years. Your account earns 9.5 % interest monthly. How much interest will you earn?$_________ (Round to the nearest DOLLAR)

Answer :

ANSWER

$530,663

EXPLANATION

The amount the account will have in t years is given by,

[tex]A=P(1+\frac{r}{n})^{nt}[/tex]

Where n = 12, t = 13 years, r = 0.095 and A = 749,791. We have to find P,

[tex]P=\frac{A}{(1+\frac{r}{n})^{nt}}[/tex]

Replace with the values and solve,

[tex]P=\frac{749,791}{(1+\frac{0.095}{12})^{12\cdot13}}\approx219,128[/tex]

The interest earned is the difference between the initial deposit P and the final amount A,

[tex]i=A-P=749,791-219,128=530,663[/tex]

Hence, the interest earned would be $530,663.

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