Suppose you want to end up with $5,000 in a bank account after 4 years earning a rate of 3.5% compounding monthly. How much would you have to initially invest?

Question

anonymous · Answer

u want to end up wid only 5000 bucks? :P  Just kidding

Use the compound interest formula: Amount = P*(1 +  r/100)^t

anonymous · Answer

What does p and r equal?
T=time right?

anonymous · Answer

p is intiially what u put in. Called principal
r is rate
t is time, in this case, no of months, as interest is monthly

anonymous · Answer

Would the answer be 5007?

anonymous · Answer

no. show me wat u did

oaktree · Answer

No, the answer is 4346.79117.

anonymous · Answer

5000*(1+0.035/100)^4

oaktree · Answer

You should use:
$$Final amount = (Principalamount)\times e ^{rt}$$

oaktree · Answer

So, 5000 = P x e^(0.035)(4), and of course use e=2.718281828...

oaktree · Answer

The formula you posted is for depreciating and appreciating values. Not bank accounts.

anonymous · Answer

Isnt that to be used if we have a copmpounding interest?

oaktree · Answer

Look at the question. It says "3.5% compounded monthly".

anonymous · Answer

oki so? monthly and yearly doesnt mattter right?