Question

Money is invested into an account earning 4.24% interest compounded annually. If the accumulated value after 18 years will be $25,000, approximately how much money is presently in the account?

Answer 1

Answer: $11,839.16

Explanation:

Use the compounded annually formula:
`A = P(1+r)^t`, where:

• A is the accumulated amount (total amount)
• P is the principle (amount invested)
• r is the interest rate (in decimal form)
• t is the time (length of time the principle amount was invested)

`A=P(1 + r)^t\\\\25,000=P(1+0.0424)^(18)\\\\(25,000)/((1.0424)^(18))=P\\\\11,839.156=P\\\\11,839.16 = P\quad \text{(rounded up to the nearest penny)}`