Question

Brad wants to have $14832 available as a down payment for a house in 3 years. How much must he deposit now at

9.3% compounded monthly to reach that goal?
Round final answer to the nearest cent (2 decimal places)

Answer 1

P = $11233.08

Explanation:

Another word for deposit is the principal and the compounded monthly indicates we're working with compound interest.

The formula for compound interest is:

`A(t)=P(1+(r)/(n) )^(rt)`, where P is the principal ("deposit"), r is the rate, n is the number of compounding periods, and t is the time.

Before solving, we will need to convert the percentage to a decimal (9.3% to 0.093) and remember that n = 12, since there are 12 months in a year.

Thus, we will need to solve for P to find Brad's deposit:

`14832=P((0.093)/(12))(^(12*3))\\14832=P(1.00775)^(36) \\14832=1.32038641P\\11233.07532=11233.08=P`