Question

in 15 years Pam hope to have $30,000to make a down payment on a house. how much would she need to invest right now in a mutual fund that earns 8% annual interest in order to have enough for her down payment in 15 years​

Answer 1

Answer:

She needs to invest $13,636.36 right now

Step-by-step explanation:

This is a simple interest problem.

The simple interest formula is given by:

$E = P*I*t$

In which E is the amount of interest earned, P is the principal(the initial amount of money), I is the interest rate(yearly, as a decimal) and t is the time.

After t years, the total amount of money is:

$T = E + P$

In this question:

In 15 years, so $t = 15$

She wants to have $30,000, so $T = 30000$

8% interest, so $I = 0.08$

We have to find P.

$T = E + P$

$30000 = E + P$

$E = 30000 - P$

Replacing:

$E = P*I*t$

$30000 - P = P*0.08*15$

$30000 - P = 1.2P$

$2.2P = 30000$

$P = \frac{30000}{2.2}$

$P = 13636.36$

She needs to invest $13,636.36 right now