Khloe is going to invest in an account paying an interest rate of 1.5% compounded annually. How much would Khloe need to invest, to the nearest dollar, for the value of the account to reach 54,000 in 11 years?

Solution

K h l oe 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 1.5% 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 K h l oe 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 54, 000 in 11 ye a rs ?

Principal : 45842.39

Solution steps

Translate the problem into an equation:

54000 = P (1 + \frac{0.015}{1})^{1 \cdot 11}

Solve for

P, 54000 = P (1 + \frac{0.015}{1})^{1 \cdot 11} : P = 45842.39

Principal : 45842.39