Answer to Question #333441 in Financial Math for Okay

Question

Marves wants to have a total of N$4500 in two years so he can take a trip to Harare. He finds an 

account that pays 4% interest compounded monthly.

How much should Marves put into this account so that he’ll have N$4500 at the end of two 

years?

Answer 1

The formula for compound interest is

$$A=P(1+\dfrac{r}{n})^{nt}$$

$$P=A(1+\dfrac{r}{n})^{-nt}$$

$$P=\$4500(1+\dfrac{0.04}{12})^{-12 (2)}$$

$$P=\$4155$$

Marves has to put $4155 into this account.