Final answer:
To have $2,500 in 5 years with a 9% interest rate compounded monthly, you would need to invest approximately $1,608.21 today.
Step-by-step explanation:
To calculate the amount, you need to invest today to have $2,500 in 5 years with a 9% interest rate compounded monthly, you can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
- A is the future value ($2,500 in this case)
- P is the principal amount (what you need to find)
- r is the annual interest rate as a decimal (9% = 0.09)
- n is the number of times interest is compounded per year (12 for monthly compounding)
- t is the number of years (5 in this case)
Plugging in the values, we get:
- A = P(1 + r/n)^(nt)
- 2500 = P(1 + 0.09/12)^(12 * 5)
- 2500 = P(1.0075)^(60)
- P = 2500 / (1.0075)^60
- P ≈ $1608.21
Therefore, you would need to invest approximately $1,608.21 today to have $2,500 in 5 years with a 9% interest rate compounded monthly. The closest option is $1,597, so the correct answer is A.