Question

Lect the correct answer. to have $25,000 to spend on a new car in five years, how much money should jill invest today at 8% compounded monthly? a. $5,000 b. $16,463 c. $16,780 d. $20,000

Answer 1

Jill should invest approximately $16,463 today at 8% compounded monthly to have $25,000 in five years.

Step-by-step explanation:

To calculate how much money Jill should invest today at 8% compounded monthly to have $25,000 in five years, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where A is the future value, P is the principal amount (the initial investment), r is the annual interest rate (as a decimal), n is the number of times the interest is compounded per year, and t is the number of years.

Let's plug in the values:

A = $25,000, r = 0.08, n = 12 (monthly compounding), and t = 5

$25,000 = P(1 + 0.08/12)^(12*5)

Solving for P:

P = $25,000 / (1 + 0.08/12)^(12*5)

Using a calculator, P ≈ $16,463

Therefore, Jill should invest approximately $16,463 today to have $25,000 in five years.