Question

A farmer wants to invest some money now to buy a new tractor in the future. If she wants to have ​275,000 available in 3 ​years, how much does hehe need to invest now in a CD paying 4.65​% interest compounded monthlymonthly​?

Answer 1

$ 53,545.17 ( approx )

Step-by-step explanation:

Since, the future value formula is,

`A=P(1+r)^t`

Where,

P = Invested amount,

r = rate of increasing per year,

t = number of periods,

Here, A = 275000,

Annual rate = 4.65% = 0.0465,

So, rate per month, r =
`(0.0465)/(12)`

Number of years = 3,

So, the number of months, t = 12 × 3 = 36,

By substituting the values in the above formula,

`275000=P(1+0.0465)^(36)`

`275000=P(1.0465)^(36)`

`P=(275000)/((1.0465)^(36))=53545.1719479\approx \$ 53545.17`

Hence, he needs to invest approximately $ 53545.17.