Question

Austin is going to invest in an account paying an interest rate of 2.2% compounded daily. How much would Austin need to invest, to the nearest hundred dollars, for the value of the account to reach $27,000 in 6 years?

Answer 1

$23,700

Explanation:

The compound interest formula can be helpful for this. Fill in the given values and solve for the unknown.

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

where r is the annual interest rate, n is the number of times interest is compounded in a year, t is the number of years, P is the amount invested, and FV is the future value of that investment.

$27,000 = P(1 +0.022/365)^(365·6) = 1.1411037P

P ≈ $23,700