In 3 years, Bobby wants to buy a bicycle that costs 700.00. If he opens a savings account that earns 7% interest compounded annually, how much will he have to deposit as principal to have enough money in 3 years to buy the bike?

Solución

I n 3 ye a rs, B o bb y w an t s t o b u y a bi cyc l e t ha t cos t s 700.00. I f h e o p e n s a s a v in g s a cco u n t t ha t e a r n s 7% in t eres t co m p o u n d e d ann u a ll y, h o w m u c h w i ll h e ha v e t o d e p os i t a s p r in c i p a l t o ha v e e n o ug h m o n ey in 3 ye a rs t o b u y t h e bik e ?

Principal : 571.41

Pasos de solución

Translate the problem into an equation:

700 = P (1 + \frac{0.07}{1})^{1 \cdot 3}

Resolver para

P, 700 = P (1 + \frac{0.07}{1})^{1 \cdot 3} : P = 571.41

Principal : 571.41