Question

You plan to take all the money that has accumulated in your account in 3 years and invest it further so that you have a sum of 33,000 8 years from now.

What is the amount that must be accumulated at t=3 in your account assuming this investment is governed by simple discount d=2.4%

Answer 1

• We need to see that in 5 years time between years 3 and 8, we accumulate 33000.
• We are given simple discounting, which is the opposite of simple interest
• We need to find out the principal at the beginning of year 3 that will amount to 33000 in 5 years time at an interest rate of 2.4%

RXT A= P X (1+ 100

A = amount, P = Principal, R = rate, T = Time

33000 = P X (1+ 2.4 x 5 100

P = 29, 464.29

Therefore, if we accumulate 29,464.29 in account at time 3, we will have 33000 at the end of year 8