Question

9. Madison needs $10 000.00 in 16 years at an interest rate of 3 %/a compounded monthly. How much should she invest?

Answer 1

Case: Compound interest

Method:

The formula is:

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

P =?

A= $10 000.00

n = 12

r = 3% or 0.03

t = 16 years

`\begin{gathered} 10000=P(1+(0.03)/(12))^(12*16) \\ 10000=P(1.0025)^(192) \\ 10000=P*1.6151 \\ P=(10000)/(1.6151) \\ P=6191.54 \end{gathered}`

Final answer: To the nearest cent

She should invest $6191.54