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Each of the following situations is independent. Work out your own solution to each situation, and then check it against the solution provided.John plans to retire in 12 years. Upon retiring, he would like to take an extended vacation, which he expects will cost at least $40,000. What lump-sum amount must he invest now to have $40,000 at the end of 12 years if the rate of return is:Twelve percent?

Respuesta :

John need to invest $16393.44 with the process of simple interest.

What is simple interest?

Simple interest is calculated based on a loan's principal or the initial deposit into a savings account. Simple interest doesn't compound, therefore a creditor will only charge interest on the principal sum, and a borrower will never be required to pay further interest on the interest that has already accrued.

Rate of interest = 12%principal + interest = $40000

Time = 12 years

Simple interest [tex]=\frac{p \times 12 \times 12}{100}\\=1.44p Now principal + interest = 40000\Rightarrow p+1.44p=40000\\\Rightarrow 2.44p=40000\\\Rightarrow p=\frac{40000}{2.44}\\\Rightarrow p= 16393.44[/tex]

Therefore, John need to invest $16393.44.

To learn more about simple interest from the given link https://brainly.com/question/25793394

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