Question

if you have 3,500 after 10 years on an investment that pays 3.5% compounded daily, what was the principle amount you started with ?

Answer 1

Answer: $2,466.45

Explanation:

Hi, to answer this question we have to apply the compounded interest formula:

A = P (1 + r/n) nt

Where:

A = Future value of investment (principal + interest)

P = Principal Amount

r = Nominal Interest Rate (decimal form, 3.5/100= 0.035)

n= number of compounding periods in each year (365)

Replacing with the values given

3,500= P (1+ 0.035/365)^365(10)

Solving for P

3,500= P (1.00009589)^3650

3,500/ (1.00009589)^3650 =P

P = $2,466.45