Question

You want to have $16,000 in 8 years for a dream vacation. If you can earn an interest rate of .8 percent per month, how much will you have to deposit today?

Answer 1

Explanation:

Simple interest with no compounding would look like this:

8 years is 8 x 12 = 96 months

.8 percent is .008 in decimal

16000 = x + 96 * .008 * x

16000 = 1.768 x

x = $ 9049.77

WITH compounding :

16000 = x ( 1.008)^96 shows x = $ 7445.76