Question

1.You need $3,000 to buy a new stereo for your car in 3 years. What value you must have now if the compounded annually return is 10%.

Answer 1

Answer:

$2253.94.

Explanation:

• The amount needed = $3,000

,

• Time = 3 years

,

• Interest Rate = 10% = 0.1

For a principal, P invested at compound interest, the amount accrued is calculated using the formula:

$\begin{gathered} A(t)=P(1+r)^n \\ \implies P=\frac{A(t)}{(1+r)^n} \end{gathered}$

Substitute the given values:

$\begin{gathered} P=\frac{3000}{(1+0.1)^3} \\ P=\ 2253.94 \end{gathered}$

The principal you must have now is approximately $2253.94.