Question

Solve this application using logarithms. How much principal, to the nearest dollar, should you invest at 4% in order to have $3,000 for a vacation to Europe in 3 years? ≈ $ a0

Answer 1

We have given amount after 3 years = $3,000.

Rate of interest = 4%.

Number of years = 3 years.

We know compound interest formula.

Note: We can use compound interest formula directly. No log required there.

A=P(1+r)^t

Plugging values in formula, we get

`3000=P\left(1+0.04\right)^3`

We need to solve it for P now.

`3000=P(1.04)^3`

Dividing both sides by (1.04)^3, we get

`(3000)/((1.04)^3)=P`

(1.04)^3 = 1.124864

Dividing 3000 by 1.124864, we get

P = 2666.99

P ≈ $2667.00