SOLUTION: how much would you need to deposit in an account now in order to have $4,000.00 in the account in 5 years? Assume the account earns 3% interest compound monthly.

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Question 326637: how much would you need to deposit in an account now in order to have $4,000.00 in the account in 5 years? Assume the account earns 3% interest compound monthly.
Answer by galactus(183) About Me  (Show Source):
You can put this solution on YOUR website!
The interest formula is
A=P%281%2Br%2Fn%29%5E%28nt%29
Now, in this case, we want to end up with 4,000. We are given n, r, and A.
We have to solve for P, the initial amount invested.
n=the number of times compounded in a year. In this case, n=12
r=.03
A=4000
4000=P%281%2B.03%2F12%29%5E%2812%2A5%29
4000=P%281.0025%29%5E%2860%29
P=4000%2F%281.0025%29%5E60
P=3443.48
We would have to invest 3443.48 in order to get 4000 at the end of 5 years at 3% interest compounded monthly.
If you encounter subsequent problems of this nature, look at what you're given and sub them into the formula, then solve for the unknown.