Question

(25 POINTS)Please help me, and show all of your work step by step.

Now say you invest $6,500 and the highest interest rate you can find is 2.5% compounded annually, but you would have to leave this investment in the account for a minimum of 5 years. If you decide to wait 5 years to buy the car, how much more money will you have to save to buy a car at the price of $8,000? Use the compound interest formula A = P(1 + i)^n.
A = accumulated amount
P = principle
i = interest rate
n = number of years

Answer 1

$ 645.85

Explanation:

First you would plug 6,500 into P. The plug 2.5% as 0.025 into i. And plug the years (5) into n.

A = 6500 (1 + 0.025)^5 = 7354.15

That is the amount that would be in the account at the end of the 5 years.

Then you take the cost of the car (8,000) and subtract the money left in the account (7,354.15).

8000 - 7354.15 = 645.85

Your final answer would be rounded to the nearest cent, or the hundredths place.