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Fwam is going to invest in an account paying an interest rate of 5.9% compounded

daily. How much would Fwam need to invest, to the nearest hundred dollars, for the
value of the account to reach $91,000 in 12 years?

1 Answer

2 votes

Final answer:

Fwam would need to invest approximately $48,725 for the value of the account to reach $91,000 in 12 years.

Step-by-step explanation:

To calculate the amount Fwam needs to invest, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:

  • A represents the future value of the account ($91,000)
  • P represents the principal amount Fwam needs to invest
  • r represents the interest rate per period (5.9% or 0.059 as a decimal)
  • n represents the number of compounding periods per year (365 since it's compounded daily)
  • t represents the number of years (12)

Plugging in the values:

$91,000 = P(1 + 0.059/365)^(365*12)

Solving for P:

P = $91,000 / (1 + 0.059/365)^(365*12)

Calculating this value, Fwam would need to invest approximately $48,725 to the nearest hundred dollars for the value of the account to reach $91,000 in 12 years.

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