Question

Question 6 20 pts How much would you have to deposit in your bank account in year 5 and year 6 (the same amount in each year) to have $5,000 in your account in year 8 if your bank account earns 3% compounded annually? 0 $2,288 O $2,322 0 $2,356 O $2,500

Answer 1

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

5000=P*(1.03)^3+P*(1.03)^2

5000=P[(1.03)^3+(1.03)^2]

5000=P*2.153627

P=5000/2.153627

=$2322(Approx).