Mike gioulis would like to have $25,000 in 4 years to pay off a balloon payment on his business mortgage. His money market account is paying 1.825% compounded daily Disregarding leap years, how much money must Mike put in his account now to achieve his goal? round to the nearest whole dollar

Question

Mathematics

Champ

2 May, 00:31

Mike gioulis would like to have $25,000 in 4 years to pay off a balloon payment on his business mortgage. His money market account is paying 1.825% compounded daily Disregarding leap years, how much money must Mike put in his account now to achieve his goal? round to the nearest whole dollar

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Teddy · Answer 1

You can do it using daily or continuous compounding

daily interest =.01825/365

= 5 * 10^-5

number of periods = 365 * 4 = 1460

1 + 5*10^-5 = 1.00005

1.00005^1460 = 1.07573

1.07573 x = 25,000

x = 23,240

if continuous

a = p e^rt

a = p e^ (5*10^-5*1460)

a = p e^ (.073)

a = p (1.07573)