Given Information:
Annual interest rate = r = 10%
Accumulated amount = A = $6380.00
Semi-annual compounding = n = 2
Number of years = t = 38/12 = 19/6
Required Information
Principle amount= P = ?
Answer:
Principle amount= P = $4,684.05
Step-by-step explanation:
The principal amounts in terms of compound interest is given by
[tex]$ P = \frac{A}{(1 + i)^N} $[/tex]
Where
i = r/n
i = 0.10/2
i = 0.05
N = n*t
N = 2*19/6
N = 19/3
So, the principal amount is
[tex]P = \frac{6380.00}{(1 + 0.05)^{19/3}} \\\\P= \$4,684.05 \\\\[/tex]
Therefore, you need to invest $4,684.05 at 10% compounded semiannually for 38 months to get $6380.00 in savings.
