How much do you need to deposit in an account today, if you want to have $30,000 in the account in 5 years, assuming the account earns 8% interest rate annually? b. If you deposit $22,000 in the account today, what rate of interest would you need to earn annually in order to have exactly $30,000 in the account in 5 years? c. Assuming your account earns 0.5% interest rate every month, and that you make an initial deposit of $10,000 today, how much do you need to deposit every month in your account in order to have exactly $30,000 in 5 years? (Hint: use the PMT variable to represent the monthly deposit; make sure you use the number of months for the number of peri

How much do you need to deposit in an account today, if you want to have $30,000 in the account in 5 years, assuming the account earns 8% interest rate annually?

PV = FV / (1+R) ^n = 30000 / (1+0.08) ^5 = $20,417.5

b. If you deposit $22,000 in the account today, what rate of interest would you need to earn annually in order to have exactly $30,000 in the account in 5 years?

PV = FV / (1+R) ^n

22,000 = 30000 / (1+r) ^5 = 22000 (1+r) ^5 = 30000

divide both sides by 22000

1+r^5 = 1.36

Take the 5th root of both sides

1+r = 5√1.36

Therefore r = (5√1.36) - 1 = 4.83% approximately 5%

c. Assuming your account earns 0.5% interest rate every month, and that you make an initial deposit of $10,000 today, how much do you need to deposit every month in your account in order to have exactly $30,000 in 5 years?

Step 1

The initial deposit of $10,000 will yeild an interest of (10,000*0.5%*12*5) = 3000

Total=13,000

Step 2

The balance of 17,000 can be generated using the PMT excel formula

Enter = = PMT (r, n, pv)

PV 17000

r 0.50%

n 60

Monthly Amount = - £328.66