Fatoumata is going to invest in an account paying an interest rate of 3.9% compounded monthly. How much would Fatoumata need to invest, to the nearest dollar, for the value of the account to reach 7,400 in 8 years?

Solution

F a t o u ma t a 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 3.9% 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 F a t o u ma t a 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 7, 400 in 8 ye a rs ?

Principal : 5419.4

Solution steps

Translate the problem into an equation:

7400 = P (1 + \frac{0.039}{12})^{12 \cdot 8}

Solve for

P, 7400 = P (1 + \frac{0.039}{12})^{12 \cdot 8} : P = 5419.4

Principal : 5419.4