Question

How much must you invest in an account earning 3.5% interest compounded weekly (52 times per year) in order for it to be worth $600 at the end of three years? Round your answer to the nearest cent.

Answer 1

It must be invest $540.21 in an account that returns 3.5% comp. weekly in order to obtain $600 in 3 years (156 weeks).

Step-by-step explanation:

Hi, first we need to determine the effective weekly rate that we need to use in order to find the present value that is required by the problem. The way to do it is:

`r(e.weekly)=(0.035)/(52) =0.000673`

Now, the formula that we need to use in order to find the present value is:

`PV=(FV)/((1+r)^t)`

Where:

PV= Present value

FV=Future value (in our case, $600)

r= Discount rate (in our case, 0.000673)

t= Years of investment (in our case, 3yrs*52=156)

Everything should look like this:

`PV=(600)/((1+0.000673)^(156) )=540.21`

So, you have to invest $540.21 at 3.5% compounded weekly for 3 years in order to obtain $600.

Best of luck