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The formula P=A/(1+r)^t can be used to relate the future value A of a deposit of P dollarsin an account that earns an annual interest rate r (expressed as a decimal) after t years.How much would you have to deposit today in order to have $5000 in 4 years in abank account that pays 5% annual interest?

Respuesta :

Given the formula

[tex]P=\frac{A}{(1+r)^t}[/tex]

And given the information:

A = $5000

r = 0.05 (5%)

t = 4 years

Substituting the values in the formula:

[tex]\begin{gathered} P=\frac{5000}{(1+0.05)^4} \\ P=\frac{5000}{1.05^4} \\ P=\frac{5000}{1.2155} \\ P=4113.5 \end{gathered}[/tex]

Answer: You have to invest $4113.5.

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