Answer:
<u>Trafton will need to pay $ 900 in addition to what is in his savings account, to buy the used car he wants.</u>
Step-by-step explanation:
1. Let's review the information given to us to answer the question correctly:
Initial deposit = $ 7,000
Annual interest = 6.5% = 0.065 compounded continuously
Time of the investment = 4 years
Price of the used car Trafton wants to buy = $ 10,000
2. How much money will he need to pay in addition to what is in his savings account?
1. For answering the question, let's calculate how much money Trafton has in his savings account after 4 years, this way:
FV = PV * e ^ (i * t)
Where,
FV = Future value of the initial deposit after t time
PV = Initial deposit
e = Euler's number (2.7183)
i = 0.065 compounded continuously
t = 4 years
Replacing with the real values, we have:
FV = 7,000 * 2.7183^(0.065 * 4)
FV = 7,000 * 1.30 (Rounding to the nearest hundredth)
FV = $ 9,100
Now, we can elaborate how much money will Trafton need to pay in addition, as follows:
Money in addition = Price of the used car Trafton wants to buy - Future Value of the savings account after 4 years
Money in addition = 10,000 - 9,100
Money in addition = $ 900
<u>Trafton will need to pay $ 900 in addition to what is in his savings account, to buy the used car he wants.</u>
