Question

Paisley is going to invest in an account paying an interestrate of 34% compounded daily. How much would Paisleyneed to invest, to the nearest dollar, for the value of theaccount to reach $400 in 16 years?

Answer 1

Answer:

$2

Explanation:

To solve the given problem, we'll use the below compound interest formula;

$A=P(1+\frac{r}{n})^{nt}$

where A = future amount = $400

P = the initial amount( principal)

r = annual interest rate in decimal form = 34/100 = 0.34

n = number of compounding periods in a year = 365

t = time in years = 16

Let's go ahead and substitute the above values into our formula and solve for P;

$\begin{gathered} 400=P(1+\frac{0.34}{365})^{365\times16} \\ 400=P(1.0009)^{5840} \\ 400=229.86P \\ P=\frac{400}{229.86} \\ \therefore P=2\text{ dollars} \end{gathered}$