Question

mike gioulis would like to have $25,000 in 4 years to pay off a balloon payment on his business mortgage. His money market account is paying 1.825% compounded daily Disregarding leap years, how much money must Mike put in his account now to achieve his goal? round to the nearest whole dollar

Answer 1

You can do it using daily or continuous compounding

daily interest = .01825/365 
= 5 * 10^-5 
number of periods = 365 * 4 = 1460 

1 + 5*10^-5 = 1.00005 
1.00005^1460 = 1.07573  
1.07573 x = 25,000 
x = 23,240 

if continuous 
a = p e^rt 
a = p e^(5*10^-5*1460) 
a = p e^ (.073) 
a = p (1.07573)