SOLUTION: Pete figures he'll need a new car in about 5 years. He believes he'll need about $15,000 and plans on depositing his money into an account with a 12% interest rate compounded semia

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Question 768240: Pete figures he'll need a new car in about 5 years. He believes he'll need about $15,000 and plans on depositing his money into an account with a 12% interest rate compounded semiannually. How much does Pete need to deposit?
Answer by lwsshak3(11628)   (Show Source): You can put this solution on YOUR website!
Pete figures he'll need a new car in about 5 years. He believes he'll need about $15,000 and plans on depositing his money into an account with a 12% interest rate compounded semiannually. How much does Pete need to deposit?
***
Compound Interest Formula: A=P(1+i)^n, P=initial investment, i=interest rate per compounding period,
n=number of compounding periods, A=amount after n-periods.
For given problem:
P=?
i=.12/2=.06
n=5*2=10
A=$15000
..
15000=P(1+.06)^10
15000=P(1.06)^10
P=15000/(1.06)^10
P=8375.92
How much does Pete need to deposit? $8376
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