Question

A company wants to have $20,000 at the end of a ten-year period by investing a single sum now. How much needs to be invested in order to have the desired sum in ten years, if the money can be invested at 12%

Answer 1

Principal is $6441.22

Explanation:

let us assume the investment is compounded over the given period

Given data

Final amount A= $20,000

Rate r= 12%= 0.12

Time t= 10 years

principal=?

The compound interest formula is

`A= P(1+r)^n^t`

Substituting our given data we have

`20000= P(1+0.12)^1^0\\20000= P(1.12)^1^0\\20000= P(3.105)\\`

Dividing both side by 3.105 to find P

`P=(20000)/(3.105) \\P= 6441.22`

Principal is $6441.22