Question

Adella wants to have $10,000.00 saved in 5 years. Her local bank offers an account at 4% APR

compounding monthly. How much would she need to deposit to reach her goal?

$8000.33

$8191.67

$8189.67

$8219.29

Answer 1

$8191.67

i just took the test

Answer 2

Compound interest

Generally

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

Where

P = principal amount

r = annual rate of interest

t = number of years

A = amount of money after year t

n = number of times the interest is compounding per year.

In this case the, the n=12, since the APR is compounding monthly.

Also R=4%=4/100=0.04

t=5years

Adella wants her money to amount to $10,000 in 5 years

Then, A=$10,000

Applying the formulas

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

$10,000=P(1+0.04/12)^(12×5)

$10,000=P(1+0.003333)^60

$10,000=P(1.003333)^60

$10,000=P(1.221)

Then P=$10,000/1.221

P=$8190.008

The correct answer is the third option

It is closer to the third option than it is to the second option