Question

Danny wants to buy a truck in 4 years. He is going to put away $2,500.00 into his savings account that will pay him 6.75% interest compounded monthly. How much will he have when he withdraws the funds to give a down payment? a $775.43 b $3,272.43 c $3,275.43 d $772.43

Answer 1

b $3,272.43

Explanation:

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

Where

A= future value

P= principal = $2500

r= interest rate = 6.75% = 0.0675

n = number of periods = 12

t = time = 4 years

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

= 2500(1+0.0675/12)^12*4

= 2500(1+0.005625)^48

= 2500(1.005625)^48

= 2500(1.3089737859257)

= 3272.4344648144

Approximately

A= $3272.43

He will have $3272.43 to give as down payment in 4 years