Amira is going to invest in an account paying an interest rate of 2.1% compounded quarterly. How much would Amira need to invest, to the nearest ten dollars, for the value of the account to reach 880 in 9 years?

Solution

A mi r a 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 2.1% 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 mi r a n ee d t o in v es t, t o t h e n e a res t t e n d o ll a rs, 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 880 in 9 ye a rs ?

Principal : 728.81

Solution steps

Translate the problem into an equation:

880 = P (1 + \frac{0.021}{4})^{4 \cdot 9}

Solve for

P, 880 = P (1 + \frac{0.021}{4})^{4 \cdot 9} : P = 728.81

Principal : 728.81