U4.L1.HW: Exponential Functions: Question 22

Question

How much would you need to deposit in an account now in order to have $3000 in the account in 10 years? Assume the account earns 6% interest compounded monthly.

$____________

Answer 1

3000 = P(1+.06/12)^12(10)

solve for P

P = 3000/(1.005)^120= $1,648.90 approximately

use a calculator

general formula is

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

where n= number of compounding periods per year

r = annual interest rate

t = number of years

P = starting amount

A = ending amount

plug in the numbers

r=6%= .06

t =10

n = 12

A = 3,000