Question

Colin has a goal of having CD worth $5,000 in 5 years. How much does he need to invest now in CD earning 4% compound interest to reach his goal?

Answer 1

Answer:

$4,110

Explanation:

The applicable formula is

A= P( 1 + r)^n

In this case

A is the amount after  five years = $5000

P= principal amount = ???

r= interest rate =4%

n = five years

$5000 = p( 1+ 0.04)^5

$5000=p(1.004)^5

$5000= p1.21665

P=$5000/1.21665290

P=4,109.64

Principal amount=$4,110