Answer: you have to deposit $15625 today
Step-by-step explanation:
Assuming the interest is compounded annually. We would apply the formula for determining compound interest which is expressed as
A = P(1+r/n)^nt
Where
A = total amount in the account at the end of t years
r represents the interest rate.
n represents the periodic interval at which it was compounded.
P represents the principal or initial amount deposited
From the information given,
A = $20000
r = 4.2% = 4.2/100 = 0.042
n = 1 because it was compounded once in a year.
t = 6 years
Therefore,.
20000 = P(1 + 0.042/1)^1 × 6
20000 = P(1.042)^6
20000 = 1.28P
P = 20000/1.28
P = $15625
