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.

Question

Mathematics

Aedan Krueger

7 September, 17:58

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.

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Stanley Holloway · 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