Nathaniel is going to invest in an account paying an interest rate of 3.1% compounded quarterly. How much would Nathaniel need to invest, to the nearest ten dollars, for the value of the account to reach 5,700 in 17 years?

Solution

N a t hani e l 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 3.1% 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 N a t hani e l 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 5, 700 in 17 ye a rs ?

Principal : 3371.97

Solution steps

Translate the problem into an equation:

5700 = P (1 + \frac{0.031}{4})^{4 \cdot 17}

Solve for

P, 5700 = P (1 + \frac{0.031}{4})^{4 \cdot 17} : P = 3371.97

Principal : 3371.97