Question

Kate wants to install an in ground pool in five years. She estimates the cost will be $50,000. How

much should she deposit monthly into an account that pays 1. 6% interest compounded

monthly in order to have enough money to pay for the pool in 5 years? Round your answer to

the nearest dollar

Answer 1

Kate should deposit $46,158.28 monthly into an account

In this question, we have been given the amount A = $50,000,

interest rate R = 1.6%

period t = 5 years

We need to find the principal amount (P)

First, convert R as a percent to decimal

r = 1.6/100

r = 0.016

Using the formula of compound interest for P,

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

P = 50,000.00 / (1 + 0.016/12)(12)(5)

P = $46,158.28

Therefore, Kate should deposit $46,158.28

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