Question

A businessman currently has $225,000 and wants to buy a small airplane priced at $350,000 in 5 years. He invests the $225,000 at 9% annual interest compounded monthly for 5 years. A = P(1 + ) nt A. How much money will he have after the 5-year term (investment plus interest)?

Answer 1

Answer:

The amount he will have after the 5-year term of investment is;

$\text{ \ }352,278.23$

Explanation:

Given that a businessman currently has $225,000 to invest;

$\text{ Principal P = \ 225,000}$

at 9% annual interest compounded monthly for 5 years;

$\begin{gathered} \text{rate r = 0.09} \\ \text{time t = 5 years} \\ \text{ number of times compounded per time n = 12} \end{gathered}$

Applying the compound interest formula;

$A=P(1+\frac{r}{n})^{nt}$

Substituting the given values;

$\begin{gathered} A=225,000(1+\frac{0.09}{12})^{12(5)} \\ A=225,000(1+\frac{0.09}{12})^{12(5)} \\ A=225,000(1.5656810269) \\ A=352,278.23 \\ A=\text{ \ }352,278.23 \end{gathered}$

Therefore, the amount he will have after the 5-year term of investment is;

$\text{ \ }352,278.23$