Question

Part 2:

You are planning to go on this trip in 2 years. How much money will you need to invest at a 1.55% interest rate compounded annually in order to have $2500 in 2 years? Use the compound interest formula A = P (1 + i)n. (Round final answer to the nearest cent, but otherwise don’t round any intermediate values)


Part 3:
Now say you only have $2000 to invest and the highest interest rate you can find is 1.8% compounded annually. If you decide to wait 7 years to go on the trip, how much money will you have to spend on the trip? Use the compound interest formula A = P (1 + i)n. (Round final answer to the nearest cent, but otherwise don’t round any intermediate values)




Part 4:
Write a paragraph explaining how you would prepare financially for this trip. Would you invest the $2200 and wait until it grows to $2500? Would you add to the investment of $2200 so it will grow to $2500 by the time you want to take the trip? Would you invest the $2200 and come up with the rest of the money when you want to take the trip? Explain your answer.

Answer 1

$2424.77

Explanation:

Please: post only one question at a time. I will help with Part 2:

Use the compound amount formula: A = P(1 + r)^t

Here, the final amount is $2500.

Thus, $2500 = P(1 + 0.0155)^2, where 0.0155 represents in decimal fraction format the 1.55% interest rate.

$2500

Then P = --------------------- = $2424.27

1.0155^2

$2424.77 invested at 1.55% compounded annually for 2 years will amount to $2500, as desired.