How to Achieve a $250,000 Savings Goal in 5 Years with Compound Interest
Calculating Compound Interest for Savings Goal
Given:
Estimated investment= $250,000
Year = 5 years
Interest Rate = 12% compounded monthly
Compound interest formula: Compound interest = ((P×(1+i)^n) - P)
Where P = Principal, i is the annual interest rate, and n is the number of periods
Using the given information:
Compound interest = (( $250,000 ×(1+12÷100)^5) - $250,000)
Compound interest = $68,156.18
To find the monthly investment needed:
Monthly investment = Estimated investment - Estimated interest
Monthly investment = $250,000 - $68,156.18 = $181,843.82 ÷ 60 (months) = $3,031
Therefore, the estimated monthly investment required to reach a savings goal of $250,000 in 5 years with a compound interest rate of 12% compounded monthly is $3,031.