Megan wants to save \$4, 000 for a down payment on a car. To the nearest dollar, how much will she need to invest in an account now with 7.4% APR, compounded daily, in order to reach her goal in 3 years?

Solution

M e g an w an t s t o s a v e $4, 000 f or a d o w n p a y m e n t o n a c a r . T o t h e n e a res t d o ll a r, h o w m u c h w i ll s h e n ee d t o in v es t in an a cco u n t n o w w i t h 7.4% A PR, co m p o u n d e d d ai l y, in or d er t o re a c h h er g o a l in 3 ye a rs ?

Amount : 4994.17

Solution steps

Translate the problem into an equation:

A = 4000 (1 + \frac{0.074}{365})^{365 \cdot 3}

4000 (1 + \frac{0.074}{365})^{365 \cdot 3} = 4994.17313 \dots

Round to the nearest hundredth:

4994.17

Amount : 4994.17