Compound Interest

Question

Not to sure how to approach this compound interest word problem?

 

 

How much money should be put in a savings account now that earns 3.0% a year compounded weekly if you want to have $50,000 in 15 years?

 

Round the answer to two decimal places.

 

I am getting $78,405.43

 

Any help would be greatly appreciated :-)....

Answer 1

Think about your answer because it wouldn't make any sense.  Why would you put $78,000 into an account just to have $50,000 in the future?

 

A = P(1 + r/n)^nt

 

P = principal

r = interest rate

n = number of annual compounds

t = term (years)

 

50,000 = P*(1 + .03/52)^15*52

50k = P(1.0005769)^780

50k = P(1.5681)

P = 31885.72

Answer 2

50000 = P(1+.03/52)^(52*15)

 

50000/((1+.03/52)^(52*15)) = P = 31885.54