Question

You want to have $35,000 in cash to buy a car 4 years from today. you expect to earn 8 percent, compounded annually, on your savings. how much do you need to deposit today if this is the only money you save for this purpose?

Answer 1

yee,

for compounded annualyy, with a principal of P, a rate of r (in decimal form) and time, t, in years


`A=P(1+r)^t`

given
amount you want=35000
r=8%=0.08
t=4


`35000=P(1+0.08)^4`

`35000=P(1.08)^4`
use your calculator to divide both sides by 1.08⁴
25726.044=P
so you need to deposit $25726.04

Answer 2

You will need to use this formula:
Principal = Total ÷ (1 + Rate) ^ years
Principal = 35,000 / [1.08]^4
Principal = 35,000 / 1.36048896
Principal = 25,726.04
So, you would have to deposit $25,762.04 @ 8 per cent to have 35,000 in four years.