Isaiah is going to invest in an account paying an interest rate of 4.9% compounded monthly. How much would Isaiah need to invest, to the nearest ten dollars, for the value of the account to reach 1,150 in 14 years?

Solution

I s aiah 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 4.9% co m p o u n d e d m o n t h l y . Ho w m u c h w o u l d I s aiah 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 1, 150 in 14 ye a rs ?

Principal : 579.93

Solution steps

Translate the problem into an equation:

1150 = P (1 + \frac{0.049}{12})^{12 \cdot 14}

Solve for

P, 1150 = P (1 + \frac{0.049}{12})^{12 \cdot 14} : P = 579.93

Principal : 579.93