SOLUTION: first question: how much money will you have to deposit in the bank today to buy a house, which will be worth $250,000 five years from now? the bank is charging 6% compounded ye

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Question 6400: first question:
how much money will you have to deposit in the bank today to buy a house, which will be worth $250,000 five years from now? the bank is charging 6% compounded yearly interest?
250000 = (2.06P)5 250000/5 = 2.06/5 50000?
250000/ (1 + .06/2) 10
second question:
how much money will you have to deposit in the bank today to buy a boat which will be worth $7500 four years from today? use 6% simple interest.

hi there,
ugh! im so stuck., please please help me, thanks!
jen
Answer by longjonsilver(2297) About Me  (Show Source):
You can put this solution on YOUR website!
right then..fairly simple question so long as you understand what compound interest is:

Lets start with a definition: Let x = amount we start with. So,

now = x
after 1 year, we will have 1.06x ie 6% increase.
after 2 years we will have 1.06(1.06x) ie a 6% increase of last year's amount.
after 2 years we will have 1.06(1.06(1.06x)) ie a 6% increase of last year's amount... etc

so, we get a pattern forming:

now = x
after 1 year = 1.06x
after 2 years = 1.06%5E2%28x%29
after 3 years = 1.06%5E3%28x%29
after 4 years = 1.06%5E4%28x%29
after 5 years = 1.06%5E5%28x%29 which is equal to 250000

so, 1.06%5E5%28x%29+=+250000

x+=+250000%2F%281.06%5E5%29
x = 186,814.55 rounded up to nearest cent.


jon.