Question

Cynthia invests some money in a bank which pays 5% compound interest per year.

She wants it to be worth over £8000 at the end of 3 years.
What is the smallest amount, to the nearest pound, she can invest?

Answer 1

The answer to your question is £6911

Answer 2

She can invest £6911.

Explanation:

Given,

Amount (A) = £8000

Time (T) = 3 years

Rate of interest (r) = 5%

To find the principle(P)

Formula

A =
`P(1+(r)/(100))^(T)`

Now,

Putting the values of A, T, r we get,

8000 =
`P(1+(5)/(100) )^(3)`

or, P = 8000÷1.05³

or, P = 6910.7 (approx)

Hence,

She can invest £6911.