Question

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)

Answer 1

$2424.27

Explanation:

Use the compound interest formula

`A=P\cdot(1 + i)^n,`

where n is number of years, P is initial amount of money you invest, i is interest rate (as decimal) and A is final amount of money you will get.

In your case,

`A=\$2500,\\ \\n=2,\\ \\i=0.0155.`

Then

`2500=P\cdot(1 + 0.0155)^2,\\ \\P=(2500)/(1.0155^2)\approx 2424.27.`