Question

The formula A=P(1+r)^t can be used to relate the future value A of a deposit of P dollars in an account that earns an annual interest rate r (expressed as a decimal) after t years.a) Solve the formula for P.b) How much would you have to deposit today in order to have $5,000 in 5 years in a bank account that pays 4% annual interest?

Answer 1

SOLUTION:

Step 1:

In this question, we are given the following:

The formula A=P(1+r)^t can be used to relate the future value A of a deposit of P dollars in an account that earns an annual interest rate r (expressed as a decimal) after t years.

a) Solve the formula for P.

b) How much would you have to deposit today in order to have $5,000 in 5 years in a bank account that pays 4% annual interest?

Step 2:

The details of the solution are as follows:

PART A:

PART B:

$\begin{gathered} CONCLUSION: \\ From\text{ the solution, I need to deposit \ 4109.64} \\ \text{ } \end{gathered}$