James knows that he eventually wants to buy a motorcycle, and the model he has in mind costs $5,000. He has found a bank that will let him open a saving account with 7% interest that is compounded monthly. If he wants to buy his motorcycle in 5 years (he's still nervous), how much money should he invest in the account now

Question

Mathematics

Kline

5 October, 07:23

James knows that he eventually wants to buy a motorcycle, and the model he has in mind costs $5,000. He has found a bank that will let him open a saving account with 7% interest that is compounded monthly. If he wants to buy his motorcycle in 5 years (he's still nervous), how much money should he invest in the account now

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Answers (1)

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Dominik Moore · Answer 1

3527

Step-by-step explanation:

Using our compound interest formula we can plug in all of our given values and solve for P.

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

5,000=P (1+0.07/12) ^12 (5)

P=5000 / (1+0.07/12) ^60

P≈$3,527