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Sarah is going to invest in an account paying an interest rate of 6.8% compounded quarterly. How much would Sarah need to invest, to the nearest dollar, for the value of the account to reach 6,500 in 20 years?

Solution

Sarah is going to invest in an account paying an interest rate of 6.8% compounded quarterly. How much would Sarah need to invest, to the nearest dollar, for the value of the account to reach 6, 500 in 20 years?

Solution

Principal : 1687.47

Solution steps

Translate the problem into an equation:

6500 = P (1 + \frac{0.068}{4})^{4 \cdot 20}

Solve for

P, 6500 = P (1 + \frac{0.068}{4})^{4 \cdot 20} : P = 1687.47

Principal : 1687.47

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