Problema Solution
Approximately how much principal would need to be placed into an account earning 3.575% interest compounded quarterly so that it has an accumulated value of $68,000 at the end of 30 years
Answer provided by our tutors
P = the principal
r = 0.03575 or 3.575% annual interest rate
t = 30 years
n = 4*t = 4*30 = 120 compounding periods (the account is compounded quarterly)
A = $68,000 future value
A = P(1 + r/4)^n
P(1 + r/4)^n = A
P(1 + 0.0375/4)^120 = 68000
P = 68000 / ((1 + 0.0375/4)^120)
P = $22,192.37
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$22,192.37 should me placed into the account.