Question

James knows that he eventually wants to buy a motorcycle, and the model he has in mind costs $5,000. He has found a bank that will let him open a saving account with 7% interest that is compounded monthly. If he wants to buy his motorcycle in 5 years (he's still nervous), how much money should he invest in the account now? round only at the very last step of the problem. Give your answer rounded to the nearest dollar. Do not include $ in your answer choice.

Answer 1

P≈$3,527

Using our compound interest formula we can plug in all of our given values and solve for P.

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

5,000=P(1+0.07/12)^12(5)

P=5000/(1+0.07/12)^60

P≈$3,527

An account for savings: what is it?

A savings account is a simple financial product that enables you to deposit your money and often earn a small bit of interest. These accounts give you a safe location to keep your money while generating income because they are federally insured up to $250,000 per account owner.

What is the purpose of having a savings account?

Savings accounts help you control your spending by keeping money out of your checking account. Your savings account is a good place to keep emergency funds for easy access. Due to the Federal Deposit Insurance Corporation's coverage of up to $250,000, savings accounts keep your money secure.

To know more about saving account visit:

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