How much money must be put into a bank account yielding 6.42% (compounded annually)in order to have $1,671 at the end of 11 years (round to nearest $1)?

Question

Quizplus · Accepted Answer

We can use the formula for compound interest:

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

where A is the final amount, P is the principal (initial amount), r is the interest rate (as a decimal), n is the number of times the interest is compounded per year, and t is the time (in years).

We want to solve for P, so we can rearrange the formula:

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

Plugging in the given values, we get:

P = 1671/(1+0.0642/1)^(1*11)
P ≈ 843.17

Rounding to the nearest dollar, we get:

P ≈ $843

Therefore, the best choice is C.

How Much Money Must Be Put into a Bank Account