SOLUTION: You have just turned 12 years old. Your mother promises to give you a car worth $15,000 for your 21st birthday. You like putting money in your savings account (which earns 3% int

Question 329317: You have just turned 12 years old. Your mother promises to give you a car worth $15,000 for your 21st birthday. You like putting money in your savings account (which earns 3% interest compounded annually), and tell your mother you would prefer that she just give you some money now to put in the account. How much should she give you now so that it will grow to $15,000 on your 21st birthday?
Can I please get some help with this word problem and show how to even do this?! PLease!
Answer by ankor@dixie-net.com(22740) (Show Source): You can put this solution on YOUR website!
You have just turned 12 years old. Your mother promises to give you a car worth $15,000 for your 21st birthday.
You like putting money in your savings account (which earns 3% interest compounded annually),
and tell your mother you would prefer that she just give you some money now to put in the account.
How much should she give you now so that it will grow to $15,000 on your 21st birthday?
:
the compound interest formula for annual compounding,
p*(1+r)^t = A
where
A = resulting amt
p = initial amt (principal)
r = interest rate in decimals
t = time in yrs
:
t = 9 yrs, A = 15000, r = .03; find p
:
p(1.03)^9 = 15000
find 1.03^9 with a calc:
1.304773p = 15000
p =
p = $11,496.25 invested now at 3%
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