Question

A businessman currently has $225,000 and wants to buy a small airplane priced at $350,000 in 5 years. He invests the $225,000 at 9% annual interest compounded monthly for 5 years. A = P(1+)ntAt the end of the 5 years he goes to the sales office to buy the airplane. Will he have extra money after buying the airplane? How much? If not, how much will he have to borrow be able to buy the airplane?

Answer 1

`\begin{gathered} Interest\text{ compounded equation} \\ A=P(1+i)^t \\ i=\text{ interest} \\ P=\text{ initial amount} \\ t=\text{ time} \\ A=\text{ Final amount} \\ In\text{ this case} \\ i=0.09 \\ t=\text{ 5 years} \\ P=225,000 \\ A=\text{?} \\ U\sin g\text{ }Interest\text{ compounded equation} \\ A=(225,000)\cdot(1+0.09)^5 \\ A=346,190 \\ At\text{ the end of 5 years he will have \$346,190. This amount is not enough } \\ to\text{ buy the small airplane so he has to borrow.} \\ 350,000-346,190=3,810 \\ He\text{ has to borrow \$3,810 in order to buy the small airplane.} \end{gathered}`