Answer:
If interest is compounded yearly at 7% for 30 years, to reach $700,000, you must start with a deposit of $1,000, and add monthly contributions at $589.
a) $589 monthly if starting at $1,000
b) $487,274.56 interest earned out of the $700,314.56 total
Step-by-step explanation:
1. Understand Compound Interest Formula:
A = P(1 + r/n)^n(t)
A = final amount
P = initial principal balance
r = interest rate
n = number of times interest applied per time period
t = number of time periods elapsed
2. Plug in values.
3. Solve. (Should get based on values written above ≈ $700,314.56)
4. To solve for interest find out how much you contributed using this "formula": x + yz = total amount contributed by depositor, where x is the starting amount, y is the number of times you added money into the account (in terms of years, so if monthly then 12 times the # of years), and z is the amount contributed each time.
5. The answer to #4 in this case would be $213,040.00. It may differ if you changed the values from what I wrote in the "answer section".
6. You can now subtract this number from the total you solved for in #3. The answer should be $487,274.56 (or it may differ if you chose different values from the "answer section").
**see screenshots for more information...
