Find the principal amount invested if the amount in a semi-annually compounded account with a 5.05% interest rate is $16,360.93
after 60 months.
1 answer:
Use the compound amount formula:
A = P (1+r)^t (for annual compounding)
A = $16360.93 = P (1+0.505)^5
Solving for P: P = $16360.93 / 1.279 = $12,788.74
If compounding occurs monthly, the formula becomes
A = P (1 + r/n)^(nt), which here is
$16360.93 = P (1+0.0505/12)^(12*5)
$16360.93 = P (1.0042)^60
$16360.93
Solving for P: P = ------------------ = $12716.83 (assuming monthly
1.287 compounding)
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