Assume that an individual puts $10,000 into a savings account that pays 3% interest, with interest being compounded monthly. The individual plans to withdraw the balance in 5 years to buy a car. If he does not make any further deposits over this period, how much will the individual be able to put towards his purchase?

Question

Izayah Olsen

Business

21 June, 10:58

Assume that an individual puts $10,000 into a savings account that pays 3% interest, with interest being compounded monthly. The individual plans to withdraw the balance in 5 years to buy a car. If he does not make any further deposits over this period, how much will the individual be able to put towards his purchase?

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Answers (1)

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George Petty · Answer 1

Answer: $11,620

Explanation:

A=P (1+r/n) ^nt

A=$10,000 (1+0.03/12) ^12*5

A=$10,000 (1+0.0025) ^60

A=$10,000 (1.0025) ^60

A=$10,000 (1.162)

A=$11,620

Note: A = Future value

P = principal

r=Interest rate

n = no. of time Interest is compounded

t = time money is invested.