Answer:
$7.4 should be deposited at the end of each week
Step-by-step explanation:
In this question, we are asked to calculate the principal amount that should be deposited to get a house of $25,000 at the interest and time given in the question
To solve this problem, we use the compound interest formula.
Mathematically;
A = P(1+ r/n) ^ nt
From the question, we identify the following;
A is the amount that is targeted which is the principal plus the targeted interest = $25,000 according to the question
P is the amount invested at the beginning which we are looking for
r is the rate which is 7.2% = 7.2/100 = 0.072
n is the number of times we compound per year which is 12 times( compounding is per month)
t is the number of years which is 3.5 years
To get the principal, we can rewrite the equation to be;
A/(1+r/n)^nt = P
25,000/(1 + 0.072/12)^(12 * 3.5) = P
P = 25,000/18.54 = $1,348
But the question asks how much to be deposited at the end of each week
The number of weeks in 3.5 years is 3.5 * 52 =182 weeks
Thus, the amount deposited at the end of each week will be 1,348/182 = $7.4
