Question

A farmer wants to invest some money now to buy a new tractor in the future. If she wants to have ​275,000 available in 3 ​years, how much does hehe need to invest now in a CD paying 4.65​% interest compounded monthlymonthly​?

Answer 1

Answer:

$ 53,545.17 ( approx )

Explanation:

Since, the future value formula is,

$A=P(1+r)^t$

Where,

P = Invested amount,

r = rate of increasing per year,

t = number of periods,

Here, A = 275000,

Annual rate = 4.65% = 0.0465,

So, rate per month, r = $\frac{0.0465}{12}$

Number of years = 3,

So, the number of months, t = 12 × 3 = 36,

By substituting the values in the above formula,

$275000=P(1+0.0465)^{36}$

$275000=P(1.0465)^{36}$

$P=\frac{275000}{(1.0465)^{36}}=53545.1719479\approx \ 53545.17$

Hence, he needs to invest approximately $ 53545.17.