Question

Paul is saving for a down payment to buy a house. The account earns 13% interest compound quarterly, and he wants to have $15,000 in 4 years. What must his principal be? Round your answer to the nearest cent. Do not round at any point in solving process; only round your answer. Please help ASAP!! Thank you so much!

Answer 1

Answer:

The principal must be = $8991.88

Step-by-step explanation:

Formula for compound interest is:

$A = P(1 + \frac{r}{n})^{nt}$

Where A is the amount after 't' years.

P is the principal amount

n is the number of times interest is compounded each year.

r is the rate of interest.

Here, we are given that:

Amount, A = $15000

Rate of interest = 13 % compounded quarterly i.e. 4 times every year

Number of times, interest is compounded each year, n = 4

Time, t = 4 years.

To find, Principal P = ?

Putting all the given values in the formula to find P.

$15000 = P(1 + \frac{13}{400})^{4\times 4}\\\Rightarrow 15000 = P(1 + 0.0325)^{16}\\\Rightarrow 15000 = P(1.0325)^{16} \\\Rightarrow 15000 = P \times 1.66817253\\\Rightarrow P = \dfrac{15000}{1.66817253}\\\Rightarrow P \approx \ 8991.88$

So, the principal must be = $8991.88