Question

How much would you need to invest in a money market account if you would like to have $5,000 in the account at the end of 3 years? The account provides an APR of 5% compounded monthly.​

Answer 1

To calculate the amount you would need to invest in a money market account to have $5,000 at the end of 3 years, we can use the formula for future value of an investment:

FV = PV(1+r)^n

where FV is the future value of the investment, PV is the present value of the investment, r is the interest rate (expressed as a decimal), and n is the number of compounding periods.

In this case,

FV = $5,000 (future value)

r = 5% (APR) = 0.05 (as a decimal)

n = 3 years * 12 (months) = 36

So we can use the formula:

PV = FV / (1 + r)^n

PV = $5,000 / (1 + 0.05)^36

PV ≈ $3,716.76

So you would need to invest $3,716.76 in the money market account to have $5,000 in the account at the end of 3 years.