Question

How much money is needed to be invested now to obtain $12,100 8 years from now if this amount is invested at 7.25% compounded continuously?

Answer 1

$6,911.92

Explanation:

Given the following

Amount A = $12,100

Time t = 8yrs

Rate r = 7.25%

Required

Principal P

Using the compound interest formula;

A = P(1+r)^n

12,100 = P(1+0.0725)^8

12,100 = P(1.0725)^8

12100 = 1.7506P

P = 12,100/1.7506

P = 6,911.92

Hence the amount invested would have been $6,911.92