Question

Kate wants to have $25,000 in 16 years. How much does she need to invest if the interest rate is 6 percent per year?

Answer 1

Final amount that Kate wants to have (A) = $25000
Time for which the money needs to be invested (T) = 16 years
Rate of interest that Kate will get per year (R) = 6%
Let us assume the principal amount (P) = x
Then
A = P (1 + RT)
25000 = x[1 + {(6/100) * 16}]
25000 = x[1 +(96/100)]
25000 = x[196/100]
196x = 25000 * 100
x = 2500000/196
   = 12755.10 dollars
So the principal amount that needs to be invested is $12755.10.