Question

Lauren is going to invest in an account paying an interest rate of 3.4% compounded

annually. How much would Lauren need to invest, to the nearest cent, for the value of
the account to reach $13,000 in 8 years?

Answer 1

P = $9948.99

Explanation:

Use the compound amount formula A = P(1 + r)^t, with A = $13,000, t = 8 yr and r = 0.034. Find the principal amount P.

Solving A = P(1 + r)^t for P, we get:

$13,000 $13,000

P = -------------------- = --------------- = $9948.99

(1 + 0.034)^8 1.3067

Lauren needs to invest $9948.99 for this purpose.