Question

Rita promises to give her 12-year-old daughter $12,000 when she turns 18. How much does she need to put in the bank now if the interest rate is 12 percent per year?

Answer 1

$6,079.58 does she need to put in the bank now

Explanation:

Using the formula:

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

where

A is the amount

P is the principal

r is the rate of interest(in decimal) and

t is the time in years.

As per the statement:

Rita promises to give her 12-year-old daughter $12,000 when she turns 18.

⇒
`A = \$12,000`

We have to find the sum of amount she need to put in the bank now.

r = 12% = 0.12

t = years.

Substitute these in [1] to solve for P:

`12000 = P(1+0.12)^6`

⇒
`12000=P(1.12)^6`

⇒
`12000 = P(1.97382269)`

Divide both sides by 1.97382269 we get;

$6,079.57344 =P

Therefore, $6,079.58 does she need to put in the bank now if the interest rate is 12 percent per yea

Answer 2

If you save $6,079.57 today at a 12 pct annual interest rate for the next six years, you will have $12,000 at the end of 6 years.

Therefore, she need to put in $6,079.57 to the bank now if the interest rate is 12 percent per year.

I hope my answer has come to your help. God bless and have a nice day ahead!