Question

How much money should be deposited today in an account that earns 6.5% compounded monthly so that it will accumulate to $9000 in three years?

Answer 1

The compound interest formula is :

A = P ( 1 + r)^t

so, A = 9000 and r (interest per year) = 6.5% = 0.065

t = 3 years * 12 = 36

so,

`9000=P(1+(0.065)/(12))^(36)`

Solve to find P

So, (1 + 0.065/12)^36 = 1.21467

so, P = 9000/1.21467 = 7,409.41 (to the nearest cent)

The money should be deposited = $7,409.41