Respuesta :
Using compound interest, it is found that he must invest $45,225 now.
Compound interest:
[tex]A(t) = P\left(1 + \frac{r}{n}\right)^{nt}[/tex]
- A(t) is the amount of money after t years.
- P is the principal(the initial sum of money).
- r is the interest rate(as a decimal value).
- n is the number of times that interest is compounded per year.
- t is the time in years for which the money is invested or borrowed.
In this problem:
- He wants to have $1,000,000 in 65 - 20 = 45 years, hence [tex]t = 45, A(t) = 1000000[/tex].
- 6.9% annual interest, hence [tex]r = 0.069[/tex].
- Compounded monthly, hence [tex]n = 12[/tex].
Then:
[tex]A(t) = P\left(1 + \frac{r}{n}\right)^{nt}[/tex]
[tex]1000000 = P\left(1 + \frac{0.069}{12}\right)^{12(45)}[/tex]
[tex]P = \frac{1000000}{(1.00575)^{540}}[/tex]
[tex]P = 45225[/tex]
He must invest $45,225 now.
To learn more about compound interest, you can take a look at https://brainly.com/question/25781328
