If you want to have $5,000 in 10 years,how much money must you put in a savings account today? (Assume that the savings account pays 4% and it is compounded daily; round to the nearest $1).
A) $3,352
B) $3,370
C) $4,102
D) $4,207

Question

Quizplus · Accepted Answer

To find out how much money must be put in a savings account today to have $5,000 in 10 years with an interest rate of 4% compounded daily, we use the formula for compound interest: $P = \frac{A}{(1 + r/n)^{nt}}$, where P is the principal amount (initial investment), A is the amount of money accumulated after n years, including interest, r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. Plugging in the values: $P = \frac{5000}{(1 + 0.04/365)^{365*10}}$, we get approximately $3,352.

If You Want to Have $5,000 in 10 Years,how Much