Abdoulaye is going to invest in an account paying an interest rate of 5.1% compounded quarterly. How much would Abdoulaye need to invest, to the nearest cent, for the value of the account to reach 138,000 in 14 years?

Solution

A b d o u l a ye i s g o in g t o in v es t in an a cco u n t p a y in g an in t eres t r a t e o f 5.1% co m p o u n d e d q u a r t er l y . Ho w m u c h w o u l d A b d o u l a ye n ee d t o in v es t, t o t h e n e a res t ce n t, f or t h e v a l u e o f t h e a cco u n t t o re a c h 138, 000 in 14 ye a rs ?

Principal : 67881.74

Solution steps

Translate the problem into an equation:

138000 = P (1 + \frac{0.051}{4})^{4 \cdot 14}

Solve for

P, 138000 = P (1 + \frac{0.051}{4})^{4 \cdot 14} : P = 67881.74

Principal : 67881.74