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16 May, 06:38

Present Value Hoew much shuold be deposited in an account paying 7.2% interest compounded monthly in order to have a balance of $8000 after 3 years?

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  1. 16 May, 07:32
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    Answer:$6451.6 should be deposited.

    Step-by-step explanation:

    The principal was compounded monthly. This means that it was compounded 12 times in a year. So

    n = 12

    The rate at which the principal was compounded is 7.2%. So

    r = 7.2/100 = 0.072

    It was compounded for 3 years. So

    t = 3

    The formula for compound interest is

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

    A = total amount in the account at the end of t years. A is given as $8000 Therefore,

    8000 = P (1+0.072/12) ^12*3

    8000 = P (1+0.006) ^36

    8000 = P (1.006) ^36

    P = 8000/1.24

    P = $6451.6
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