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7 December, 17:41

Adella wants to have $10,000.00 saved in 5 years. Her local bank offers an account at 4% APR

compounding monthly. How much would she need to deposit to reach her goal?

$8000.33

$8191.67

$8189.67

$8219.29

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Answers (1)
  1. 7 December, 20:39
    0
    Compound interest

    Generally

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

    Where

    P = principal amount

    r = annual rate of interest

    t = number of years

    A = amount of money after year t

    n = number of times the interest is compounding per year.

    In this case the, the n=12, since the APR is compounding monthly.

    Also R=4%=4/100=0.04

    t=5years

    Adella wants her money to amount to $10,000 in 5 years

    Then, A=$10,000

    Applying the formulas

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

    $10,000=P (1+0.04/12) ^ (12*5)

    $10,000=P (1+0.003333) ^60

    $10,000=P (1.003333) ^60

    $10,000=P (1.221)

    Then P=$10,000/1.221

    P=$8190.008

    The correct answer is the third option

    It is closer to the third option than it is to the second option
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