Question

Brody is going to invest in an account paying an interest rate of 3.7% compounded monthly. How much would Brody need to invest, to the nearest hundred dollars, for the value of the account to reach $34,000 in 13 years?

Answer 1

$21,033

Explanation:

The computation of the amount invested is shown below;

As we know that

Future value = Present value × (1 + rate of interest)^number of years

Now

Present value = Future value ÷ (1 + rate of interest)^number of years

where,

Rate of interest = 3.7% ÷ 12 = 0.3083333%

And, the number of years is = 13 × 12 = 156

So, the present value is

= $34,000 ÷ (1 + 0.3083333%)^156

= $21,033