What is P?

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Adrianna want to set aside some money for a vacation in 3 years. How much does Adrianna need to set aside today in order to have $8600 in 3 years if it is invested at 5% compounded annually. I am so confused!! Thanks for all your help!!

  • What is P? -

    1.05^3 = 1.157625

    1.157625 * x = 8600

    x = 7429.00

  • What is P? -

    P = Po*(1+r)^n = $8600

    r = 5%/100% = 0.05

    n = 1comp./yr. * 3yrs. = 3 Compounding
    periods.

    Po*(1.05)^3 = 8600
    Po = 8600/1.05^3 = $7429.00 To be set
    aside today.

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