Question

How much would you need to deposit in an account now in order to have $4000 in the account in 10 years? Assume the account earns 5.3% interest compounded weekly.

Answer 1

$2355.06

Explanation:

Use the compound interest formula, filling in the numbers you know. Then solve for the number you don't know.

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

where A is the account balance, P is the amount invested, r is the annual rate, n is the number of times per year interest is compounded, and t is the number of years.

Filling in the given values, we have ...

4000 = P(1 +.053/52)^(52·10) = P(1.6984738)

P = 4000/1.6984738 ≈ 2355.06

You would need to deposit $2355.06 in order to have $4000 in 10 years.