Xin is going to invest in an account paying an interest rate of 5.8% compounded annually. How much would Xin need to invest, to the nearest hundred dollars, for the value of the account to reach 2,290 in 16 years?

Solution

X in 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 5.8% 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 X in n ee d t o in v es t, t o t h e n e a res t h u n d re d 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 2, 290 in 16 ye a rs ?

Principal : 929.11

Solution steps

Translate the problem into an equation:

2290 = P (1 + \frac{0.058}{1})^{1 \cdot 16}

Solve for

P, 2290 = P (1 + \frac{0.058}{1})^{1 \cdot 16} : P = 929.11

Principal : 929.11