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Morgarella [4.7K]
3 years ago
15

Roy Gross is considering an investment that pays 7.6 percent, compounded annually. How much will he have to invest today so that

the investment will be worth $25,000 in six years
Mathematics
1 answer:
Debora [2.8K]3 years ago
4 0

Answer: he should invest $16129 today.

Step-by-step explanation:

Let $P represent the initial amount that should be invested today. It means that principal,

P = $P

It would be compounded annually. This means that it would be compounded once in a year. So

n = 1

The rate at which the principal would be compounded is 7.6%. So

r = 7.6/100 = 0.076

The duration of the investment would be 6 years. So

t = 6

The formula for compound interest is

A = P(1+r/n)^nt

A = total amount in the account at the end of t years.

A = 25000

Therefore

25000 = P(1+0.076/1)^1×6

25000 = P(1.076)^6

25000 = 1.55P

P = 25000/1.55

P = $16129

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