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2 June, 10:57

Assume that an individual puts $10,000 into a savings account that pays 3% interest, with interest being compounded monthly. The individual plans to withdraw the balance in 5 years to buy a car. If he does not make any further deposits over this period, how much will the individual be able to put towards his purchase?

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  1. 2 June, 13:52
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    Answer: $11,620

    Explanation:

    A=P (1+r/n) ^nt

    A=$10,000 (1+0.03/12) ^12*5

    A=$10,000 (1+0.0025) ^60

    A=$10,000 (1.0025) ^60

    A=$10,000 (1.162)

    A=$11,620

    Note: A = Future value

    P = principal

    r=Interest rate

    n = no. of time Interest is compounded

    t = time money is invested.
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