SOLUTION: Richard and Colleen want to save for a boat. They estimate that they'll need about $4,500 in 7 years. Their bank offers a 2% interest rate compounded semiannually. How much would t

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Question 768239: Richard and Colleen want to save for a boat. They estimate that they'll need about $4,500 in 7 years. Their bank offers a 2% interest rate compounded semiannually. How much would they need to deposit now in order to have $4,500 in 7 years?
Answer by stanbon(75887) About Me  (Show Source):
You can put this solution on YOUR website!
Richard and Colleen want to save for a boat. They estimate that they'll need about $4,500 in 7 years. Their bank offers a 2% interest rate compounded semiannually. How much would they need to deposit now in order to have $4,500 in 7 years?
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A(t) = P(1+(r/n))^(nt)
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4500 = P(1+(0.02/2))^(2*7)
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4500 = P(1.1)^14
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P = 4500/1.1^14 = $1184.99
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Cheers,
Stan H.
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