Question

A student loan you took out is due in 3 years and requires repayment of $3,000. To pay off the loan, you set aside money in an account that pays 7% interest.

To meet your obligation, how much money do you need to deposit in the account?

Answer 1

P = $2448.89

P ~= $2,449

He need to deposit $2,449

Explanation:

Given:

Interest rate r= 7% = 0.07

Number of years n = 3 years

Future value that should be meet A = $3000

We need to calculate the initial investment (Principal P). Using the compound interest formula:

A = P(1+r)^n

P = A/(1+r)^n

Substituting the values of A, r, n, we have;

P = 3000/(1+0.07)^3

P = $2448.89

P ~= $2,449