Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.4 Compound Interest - Exercise Set 8.4: 18

Answer

The amount of money that should be deposited today is $9112.94

Work Step by Step

This is the formula we use when we make calculations with compound interest. $A = P~(1+\frac{r}{n})^{nt}$ $A$ is the final amount in the account $P$ is the principal (the amount of money invested) $r$ is the interest rate $n$ is the number of times per year the interest is compounded $t$ is the number of years $A = P~(1+\frac{r}{n})^{nt}$ $P = \frac{A}{(1+\frac{r}{n})^{nt}}$ $P = \frac{\$12,000}{(1+\frac{0.07}{2})^{(2)(4)}}$ $P = \$9112.94$ The amount of money that should be deposited today is $9112.94
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