Question

To help with her retirement savings, Donna has decided to invest. Assuming an interest rate of 3.59% compounded quarterly, how much would she have to invest to have $117,300 after 18 years?

Answer 1

We get the value of Principal amount i.e initial investment = $61640

Explanation:

Interest rate r = 3.59% or 0.0359

Compounded quarterly n = 4

Future Amount A = 117,300

Time t = 18 years

We need to find initial investment i,e Principal Amount P

The formula used is:
`A=P(1+(r)/(n))^(nt)`

Putting values and finding P

`A=P(1+(r)/(n))^(nt)\\117300=P(1+(0.0359)/(4))^(4*18) \\117300=P(1+0.008975)^(72)\\117300=P(1.008975)^(72)\\117300=P(1.903)\\P=(117300)/(1.903)\\P=61640`

So, We get the value of Principal amount i.e initial investment = $61640