Question

Find the principal amount invested if the amount in a quarterly compounded account with a 3.07% interest rate is $5,993.79 after 66 months

Answer 1

$5065.8332

Explanation:

Given that :

Compound interest formula :

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

t = period in years

n = number of compounding times per period, quarterly = 12/3 = 4

A = 5,993.79

r = 0.0307

t = 66 months = 66/12 = 5.5

5,993.79 = P(1 + 0.0307/4)^4*5.5

5,993.79 = P(1.007675)^22

5,993.79 = 1.1831795P

P = 5,993.79 / 1.1831795

P = 5065.8332

Hence, principal amount = $5065.8332