Problema Solution
How much money should be deposited today in an account that earns 4% compounded monthly so that it will accumulate 9,000 in three years rounded to the nearest cent
Answer provided by our tutors
r = 0.04 is the annual interest rate
m = 12 compounding periods per year
t = 3 years
n = m*t = 3*12 = 36 compounding periods
i = r/m = 0.04/12 = 0.01/3 interest rate per period
A = $9000 the future value
we need to find the principal P
A = P(1 + i)^n
P = A/(1 + i)^n
P = 9000/(1 + 0.01/3)^36
P = $7,983.88
$7,983.88 should be deposited.