Question

James wants to have earned $5,607 amount of interest in 26 years. Currently he finds that

his annual interest rate is 6.89%. Calculate how much money James needs to invest as his
principal in order to achieve this goal

Answer 1

James needs to invest approximately $3,129.21 as his principal at an annual interest rate of 6.89% to earn $5,607 in interest over 26 years.

Step-by-step explanation:

To calculate the amount of money James needs to invest as principal to achieve the desired interest of $5,607 in 26 years with an annual interest rate of 6.89%, we can rearrange the simple interest formula Interest = Principal × rate × time. This gives us Principal = Interest / (rate × time).

In this case, the rate is 0.0689 (6.89% expressed as a decimal), and the time is 26 years. Plugging in the numbers, we get:

Principal = $5,607 / (0.0689 × 26)

Now calculate the principal:

Principal = $5,607 / 1.7914

Principal = $3,129.21 approximately

So, James needs to invest roughly $3,129.21 as his principal to earn $5,607 in interest over 26 years at an annual interest rate of 6.89%.