Answer:
The principal amount to be to be invested=$46,613.95
Explanation:
The total amount that Lou needs to invest with Reel bank in order to have for new equipment in 7 years is known as the principal amount.
The formula for calculating total amount on investment compounded quarterly;
A=P(1+r/n)^nt
A = the future value of the investment, including the interest
P = the initial investment amount
r = the annual interest rate
n = the number of times that interest is compounded per unit t
t = the time the money is invested or borrowed for
For our case;
A=$70,000
P=p
r=6/100=0.06
n=compounded quarterly=4
t=7 years
replacing;
70,000=p(1+0.06/4)^(4×7)
70,000=p(1.015)^28
70,000=1.517 p
1.517 p=70,000
p=70,000/1.517
p=46,613.95
The principal amount to be to be invested=$46,613.95
