Question

Money is invested into an account earning 4.24% interest compounded annually. If the accumulated value after 18 years will be $25,000, approximately how much money is presently in the account?

Answer 1

Answer:   $11,839.16

Step-by-step explanation:

Use the compounded annually formula: $A = P(1+r)^t$, where:

• A is the accumulated amount (total amount)
• P is the principle (amount invested)
• r is the interest rate (in decimal form)
• t is the time (length of time the principle amount was invested)

$A=P(1 + r)^t\\\\25,000=P(1+0.0424)^{18}\\\\\dfrac{25,000}{(1.0424)^{18}}=P\\\\11,839.156=P\\\\11,839.16 = P\quad \text{(rounded up to the nearest penny)}$