Your grandmother invested one lump sum 42 years ago at 3.5% interest. Today, she gave you the proceeds of that investment which totaled $28,204.37. How much did your grandmother originally
Invest?

Question

Quizplus · Accepted Answer

To solve the problem, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where A is the total amount, P is the principal (the amount invested), r is the annual interest rate, t is the number of years, and n is the number of times the interest is compounded per year.

Plugging in the given values, we get:

28,204.37 = P(1 + 0.035/1)^(1*42)

Simplifying:

28,204.37 = P(1.035)^42

28,204.37 = 39.08P

P = $6,650

Therefore, the original investment amount was $6,650, which corresponds to choice B.

Your Grandmother Invested One Lump Sum 42 Years Ago at 3.5