235k views
1 vote
8. How much would you need to deposit in an account earning 5.6% compounded weekly in order to have $3,960 in the account in 10 years?$

User Eli Sadoff
by
7.5k points

1 Answer

5 votes

In order to calculate the initial value, let's use the formula for compound interest:


P=P_0\cdot(1+(i)/(n))^(nt)_{}

Where P is the final amount after t years, P0 is the initial amount, i is the annual interest and n is how many times the interest is compounded in a year.

So, using P = 3960, i = 0.056, t = 10 and n = 52 (there are 52 weeks in a year), we have:


\begin{gathered} 3960=P_0\cdot(1+(0.056)/(52))^(52\cdot10) \\ 3960=P_0\cdot1.750145 \\ P_0=(3960)/(1.750145)=2262.67 \end{gathered}

So you need to deposit $2262.67.

User Simian
by
8.0k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories