Omar is going to invest in an account paying an interest rate of 6% compounded monthly. How much would Omar need to invest to the nearest dollar for the value of the account to reach 32400 in 20 years?

Solution

O ma r 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% 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 O ma r 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 32400 in 20 ye a rs ?

Principal : 9787.91

Solution steps

Translate the problem into an equation:

32400 = P (1 + \frac{0.06}{12})^{12 \cdot 20}

Solve for

P, 32400 = P (1 + \frac{0.06}{12})^{12 \cdot 20} : P = 9787.91

Principal : 9787.91