Lonnie is considering doing some long term investing with money that she inherited. She would like to have $50,000 at the end of 30 years. Approximately how much money would Lonnie need to put into an account earning 6% interest compounded annually in order to meet her goal?
We calculate this problem by using the compound interest formula which is expressed as :
A = P(1+r)^t
where A is the amount accumulated, P is the principal amount, r the interest rate and t is the time
A = P(1+r)^t
50000 = P (1 + 0.06)^30
P = 8705.51 is the money he needs to put into the account