
Concept explainers
a.
To find: the amount that D should add to ensure that he has $1500 in 5 years.
a.

Answer to Problem 26PPS
Explanation of Solution
Given:
D deposited $500 that earns interest monthly and after 8 years the amount in his account is $807.07.
Calculation:
Let the rate of interest be
For the investment of $500, equation can be set up as:
Now, he wants to have $1500 in 5 years in his account. Let P be amount needed to be in his account in present.
Then,
That means, he should add
b.
To explain: The solution process used in part (a).
b.

Explanation of Solution
First find the rate of interest that gives the amount $807.07 after 8 years on investment of $500.
Then, find the amount that needs to be invested that would grow to $1500 in years at that rate of interest.
Finally, subtract the amount $807.07 from the amount found to get the money that needs to be added to the account.
c.
To write: The assumption made in calculating the amount.
c.

Explanation of Solution
The assumption made in calculating the amount that needs to be added in the account to have $1500 in years is that the rate of interest remains the same for coming years as that of the last 8 years.
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