00:01
Hi, all right, your parents agree to pay half the purchase price of a new car when you graduate from college.
00:05
You will graduate and buy the car two years from now.
00:08
You have six grand to invest today and you can earn 5 % on the invested funds.
00:15
If your parents match the amount of money you have in two years, what is the maximum amount you can spend on the new car? all right, so i'm assuming this 5 % is annual.
00:26
Like that's usually when it doesn't tell you if it's annual or monthly, whatever, we assume that's a new car.
00:30
Annual.
00:32
So that means you have 6 ,000 and then 5 % is added every year and that happens in two years.
00:38
So this is a compound interest problem.
00:41
So a is accumulated wealth.
00:43
That would be like our answer, not actually our answer because that's the amount of money that i would save.
00:49
Like this a would be how much i save.
00:51
The p is how much we originally start with.
00:53
That's called a principal.
00:54
That is 6 ,000...