Colton is going to invest in an account paying an interest rate of 2.4% compounded annually. How much would Colton need to invest, to the nearest cent, for the value of the account to reach 4,100 in 7 years?

Solution

C o lt o n 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 2.4% co m p o u n d e d ann u a ll y . Ho w m u c h w o u l d C o lt o n n ee d t o in v es t, t o t h e n e a res t ce n t, 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 4, 100 in 7 ye a rs ?

Principal : 3472.84

Solution steps

Translate the problem into an equation:

4100 = P (1 + \frac{0.024}{1})^{1 \cdot 7}

Solve for

P, 4100 = P (1 + \frac{0.024}{1})^{1 \cdot 7} : P = 3472.84

Principal : 3472.84