Question

Compound interest is given by the formula A = P ( 1 + r ) t A=P(1+r)t. Where A A is the balance of the account after t t years, and P P is the starting principal invested at an annual percentage rate of r r, expressed as a decimal. Evan is investing money into a savings account that pays 5% interest compounded annually, and plans to leave it there for 10 years. Determine what Evan needs to deposit now in order to have a balance of $30,000 in his savings account after 10 years. Evan will have to invest $ now in order to have a balance of $30,000 in his savings account after 10 years. Round your answer UP to the nearest dollar.

Answer 1

Total = principal * (1 + rate) ^ years
Solving for principal:
principal = total / [(1 + rate) ^ years]
principal = 30,000 / (1.05)^10
principal = 30,000 / 1.6288946268
principal = 18,417.40