Question

Penny received an unexpected $5,000.00 gift from a distant relative. She invests it in a mutual fund that increases the value of the original investment by 8% each year. In 15 years, Penny hopes to have $40,000 available to make a down payment on a house. How much would she need to invest right now in order to have enough for her down payment in 15 years?

Answer 1

Answer:

Penny would need to put in ~ $18,181.82

Step-by-step explanation:

Using the equation $A = P(1+rt)$

Where A = the total

P is equal to the starting amount

r is equal to the rate (percent)

and t is equal to the total time.

We can put in:

A = $40,000

r = 0.08 (8%)

t = 15

$40,000 = P(1 +(0.08* 15))\\40,000 = P(1+1.2)\\40,000 = P(2.2)\\\frac{40,000}{2.2} = P\\ \frac{200,000}{11} = P\\P = 18181.8181818181...$

Round to the nearest whole cent

P = $18,181.82