Given:
Future Value = $15,000
time (t) = 11 years
rate (r) = 4.4% or 0.044
number of conversions per year (m) = 365
Find: Initial amount or the Principal
Solution:
Formula for Compound Interest is:
[tex]F=P(1+\frac{r}{m})^{mt}[/tex]From that, we can derive the formula for the Principal or the initial amount.
[tex]P=\frac{F}{(1+\frac{r}{m})^{mt}}[/tex]Let's plug in the given data above to the formula of the principal value.
[tex]P=\frac{15,000}{(1+\frac{0.044}{365})^{365\times11}}[/tex]Then, solve for P.
[tex]P=\frac{15,000}{(1.000120548)^{4015}}=\frac{15,000}{1.622504316}\approx9,244.97[/tex]Answer: You must invest $9, 244.97 to the account in order to get $15,000 after 11 years.
