Question

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? Round to the nearest dollar.

Answer 1

Okay, so the problem says that we put a certain amount of money in a bank account, and we want to have $5,000 from the interest after 4 years.

Answer 2

The interest is 3.5% per month, and we're estimating for 4 years

Answer 3

So that should be 3.5 * 12 * 4 percent, where 3.5 is the interest, 12 is the amount of months, and 4 is the amount of years.

Answer 4

3.5 * 12 * 4 = 168%

Answer 5

So now the question is, what dollar amount, when increased by 168 percent is 5000.

Answer 6

Or: x + 1.68x = 5000

Answer 7

This can be simplified to 2.68x = 5000 because when we add the x's, there's that hidden 1 on the first x.

Answer 8

So I think the answer should be $1866

Answer 9

Thank you so much!