Brianna is going to invest in an account paying an interest rate of 3.9% compounded quarterly. How much would Brianna need to invest, to the nearest hundred dollars, for the value of the account to reach 132,000 in 16 years?

Solution

B r ianna 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 q u a r t er l y . Ho w m u c h w o u l d B r ianna 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 132, 000 in 16 ye a rs ?

Principal : 70939.28

Solution steps

Translate the problem into an equation:

132000 = P (1 + \frac{0.039}{4})^{4 \cdot 16}

Solve for

P, 132000 = P (1 + \frac{0.039}{4})^{4 \cdot 16} : P = 70939.28

Principal : 70939.28