Problema Solution
Maurice wants to have $21,000 in 10 years. Calculate how much he should invest now to achieve his goal. His rate is 6% compounded semiannually.
Answer provided by our tutors
let
P = the principal
r = 0.06 or 6% annual interest rate
t = 10 years
n = 2*t = 2*10 = 20 compounding periods (the account is compounded semiannually)
A = $21,000 future value
A = P(1 + r/2)^n
21000 = P(1 + 0.06/2)^20
P(1 + 0.03)^20 = 21000
by solving we find:
P = $11,627.19
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Maurice should invest $11,627.19.