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Popular Word Problems >

How much money should be deposited today in an account that earns 7 % compounded semiannually so that it will accumulate to 13 comma 000 in three years?

Solution

Ho w m u c h m o n ey s h o u l d b e d e p os i t e d t o d a y in an a cco u n t t ha t e a r n s 7 % co m p o u n d e d se miann u a ll y so t ha t i t w i ll a cc u m u l a t e t o 13 co mma 000 in t h ree ​ ye a rs ?

Solution

Principal : 10.58

Solution steps

Translate the problem into an equation:

13 = P (1 + \frac{0.07}{2})^{2 \cdot 3}

Solve for

P, 13 = P (1 + \frac{0.07}{2})^{2 \cdot 3} : P = 10.58

Principal : 10.58

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