Alejandro is going to invest in an account paying an interest rate of 3.2% compounded continuously. How much would Alejandro need to invest, to the nearest ten dollars, for the value of the account to reach 161,000 in 20 years?

Solution

A l e jan d ro 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 3.2% co m p o u n d e d co n t in u o u s l y . Ho w m u c h w o u l d A l e jan d ro n ee d t o in v es t, t o t h e n e a res t t e n d o ll a rs, 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 161, 000 in 20 ye a rs ?

Principal : 84894.08

Solution steps

Translate the problem into an equation:

161000 = P e^{0.032 \cdot 20}

Solve for

P, 161000 = P e^{0.032 \cdot 20} : P = 84894.08

Principal : 84894.08