james would like to deposit enough money in a savings account to have $8,000 at the end of year 3. assuming the investment will earn 5% compounded annually, what amount should james deposit in the savings account today? round your answer to the nearest dollar.

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21-10-2022
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james would like to deposit enough money in a savings account to have $8,000 at the end of year 3. assuming the investment will earn 5% compounded annually, what amount should james deposit in the savings account today? round your answer to the nearest dollar.

Answer :

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shomerajeshwari90 shomerajeshwari90 · Answer 1 · 2022-10-31T03:20:50-04:00

The amount of money James should deposit in the savings account today to accumulate $8,000 at the end of 3 years using formula of compound interest will be $6,911.

Given information,

Amount = $8,000

Time period (n) = 3

Principal = P

Interest rate compounded annually = 5%

Solving using Compound Interest formula:

Amount = P (1+r) ^n

8000 = P (1+0.05) ^3

P or Principal = 8000/1.1576 = $6,911

So, James must invest $6,911 to get $8,000 in three years.

The interest earned on savings that is computed utilizing both the original principal and the accrued interest over time is referred to as compound interest. Compound interest, sometimes known as "interest on interest," stimulates the growth of an amount more rapidly than simple interest, which is solely computed on the principal.

Learn more about compound interest here:

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