Question 7 35 points Save Answer Suppose that you would like

Question 7 3.5 points Save Answer Suppose that you would like to put money in an account today to make sure your younger sibling has enough money in 10 years to buy a car. If you would like to give your sibling $20,000 in 10 years, and you know you can get 5% interest per year from a savings account during that time, how much should you put in the account now? Attach File Browse My Computer Browse Content Collection

Solution

We need to use compound interest formula here to find the amount needed to deposit in the account.

The formula,

A = P(1+r)^t

A/(1+r)^t = P

20000/((1+0.05)^10) = $12278

So, $12,278 needs to be deposited into account to get $20000 at the end of 10 years