Question

what principal will amount to $3500 if invested at 4% interest compounded quarterly for 5 years

Answer 1

Given

The Amount is $3500.

The rate of interest is 4%.

The time taken is 5 years.

To find the principal.

Explanation:

The amount that has to be compounded quarterly for 5 years is given by,

$A=P(1+\frac{1}{4}\times\frac{r}{100})^{4t}$

That implies, for A=$3500, r=4, t=5,

$\begin{gathered} 3500=P(1+\frac{1}{4}\times\frac{4}{100})^{4\times5} \\ 3500=P(1+0.01)^{20} \\ 3500=P(1.01)^{20} \\ P(1.22)=3500 \\ P=\frac{3500}{1.22} \\ P=2868.41 \end{gathered}$

Final result: Hence, the principal is $2868.41.