Samantha is going to invest in an account paying an interest rate of 6.4% compounded monthly. How much would Samantha need to invest, to the nearest dollar, for the value of the account to reach 2,130 in 12 years?

Solution

S aman t ha 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 6.4% 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 S aman t ha 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 2, 130 in 12 ye a rs ?

Principal : 990.21

Solution steps

Translate the problem into an equation:

2130 = P (1 + \frac{0.064}{12})^{12 \cdot 12}

Solve for

P, 2130 = P (1 + \frac{0.064}{12})^{12 \cdot 12} : P = 990.21

Principal : 990.21