Darlene Fine wants to have at least $50,000 in her savings account in 10 years. If her account pays 3.6% interest compounded annually, what should Darlene's initial investment be if she plans to keep the account without making deposits or withdrawals?

Question

Mathematics

Maverick

12 April, 00:26

Darlene Fine wants to have at least $50,000 in her savings account in 10 years. If her account pays 3.6% interest compounded annually, what should Darlene's initial investment be if she plans to keep the account without making deposits or withdrawals?

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Answers (1)

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Rice · Answer 1

The formula for interest compounded annually is A=P (1 + (r/n) ^nt.

In this context: A=50,000 r=0.036 n=1, since it's compounded annually (Once per year) and t=10.

Now plug in and solve for P.

50,000=P (1 + (0.036/1) ^ (1 * 10)

50,000 = 1.42 P (I just distributed).

Divide both sides by 1.42 to get a final answer of $35,105.28.