Question

A businessman currently has $225,000 and wants to buy a small airplane priced at $350,000 in 5 years. He invests the $225,000 at 9% annual interest compounded monthly for 5 years. A = P(1 + ) nt A. How much money will he have after the 5-year term (investment plus interest)?

Answer 1

The amount he will have after the 5-year term of investment is;

`\text{ \$}352,278.23`

Step-by-step explanation:

Given that a businessman currently has $225,000 to invest;

`\text{ Principal P = \$225,000}`

at 9% annual interest compounded monthly for 5 years;

`\begin{gathered} \text{rate r = 0.09} \\ \text{time t = 5 years} \\ \text{ number of times compounded per time n = 12} \end{gathered}`

Applying the compound interest formula;

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

Substituting the given values;

`\begin{gathered} A=225,000(1+(0.09)/(12))^(12(5)) \\ A=225,000(1+(0.09)/(12))^(12(5)) \\ A=225,000(1.5656810269) \\ A=352,278.23 \\ A=\text{ \$}352,278.23 \end{gathered}`

Therefore, the amount he will have after the 5-year term of investment is;

`\text{ \$}352,278.23`