00:01
Now, in this problem it says that a mutual fund pays 4 % compounded monthly.
00:06
This is a rate of interest compounded monthly.
00:09
Now, they are asking that how much should he invest so that 7 years from now he'll have $4000 in his account.
00:20
The amount after 7 years should be $400 ,000.
00:25
So, the initial investment p is what we have to find.
00:32
Now, to calculate the initial investment to have $4000 in his account after 7 years with this much rate of interest, we can use the formula for the compound interest which is given by a equals to p times 1 plus r over n to the power n times t.
00:53
Now, here this rate of interest is given monthly.
00:55
So, in one year we know 12 months is there.
01:00
So, 12n should be equals to 12.
01:02
Now, we have all the values.
01:04
We can plug it here to find this investment amount p.
01:09
Amount is $4000...