Need help asap. So stuck on this question

Question

Jim Roznowski wants to invest some money now to buy a new tractor in the future. If he wants to have $275,000 available in 7 years , how much does he need to invest now in a CD paying 5.15 interest compounded monthly?

Answer 1

Jim needs to invest $191,913.07 now if he wants to have $275,000 available in 7 years.

Since this is a problem requiring compounded interest, then we can use the formula A = P(1 + (r/n))^nt, where is A is the future amount, P is the current amount, r is the annual rate, n is the number of compounds per year, and t is time in years. Since it is compounded monthly at a rate of 5.15% and Jim wants to have $275,000 in 7 years, A = 275000, r = 0.0515, n = 12, and t = 7. After plugging these values in, we get:

275000 = P(1 + (0.0515)/12)^(12)(7) =

P ≈ 191913.07

Therefore, Jim needs to invest $191,913.07 now.