Eva is going to invest in an account paying an interest rate of 6.5% compounded annually. How much would Eva need to invest, to the nearest cent, for the value of the account to reach 41,000 in 13 years?

Solution

E v 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 6.5% 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 E v a 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 41, 000 in 13 ye a rs ?

Principal : 18081.69

Solution steps

Translate the problem into an equation:

41000 = P (1 + \frac{0.065}{1})^{1 \cdot 13}

Solve for

P, 41000 = P (1 + \frac{0.065}{1})^{1 \cdot 13} : P = 18081.69

Principal : 18081.69