How to Achieve a $250,000 Savings Goal in 5 Years with Compound Interest

What is the estimated monthly investment needed to reach a savings goal of $250,000 in 5 years with a compound interest rate of 12% compounded monthly?

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.

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