Adam is going to invest in an account paying an interest rate of 4.2% compounded quarterly. How much would Adam need to invest, to the nearest dollar, for the value of the account to reach 6,200 in 19 years?

Solution

A d am i s g o in g t o in v es t in an a cco u n t p a y in g an in t eres t r a t e o f 4.2% co m p o u n d e d q u a r t er l y . Ho w m u c h w o u l d A d am n ee d t o in v es t, t o t h e n e a res t d o ll a r, f or t h e v a l u e o f t h e a cco u n t t o re a c h 6, 200 in 19 ye a rs ?

Principal : 2803.05

Solution steps

Translate the problem into an equation:

6200 = P (1 + \frac{0.042}{4})^{4 \cdot 19}

Solve for

P, 6200 = P (1 + \frac{0.042}{4})^{4 \cdot 19} : P = 2803.05

Principal : 2803.05