My question is: I need to have $70,000.00 in 7 years. What would my initial investment have to be if I put it in an account that pays 7% interest compounded qua

Question

How does the answer 60,000=P(1.7410) come from the equation 60,000 = P(1+0.02)^28? I need to see the whole equation.

Answer 1

The compound interest equation is P = C (1 + r/n)^(nt). Where P is the calculated value, C is the initial amount, r is the interest rate, n is the # of times per year the interest is compounded, and t is the number of years invested. If you need 70,000 in 7 years and the interest is 7% quarterly, the equation would be

70,000 = C (1 + .07/4)⁽⁴⁾⁽⁷⁾

You can then solve for C.

70,000 = C (1 + .0175)⁽²⁸⁾

70,000 = C (1.0175)⁽²⁸⁾

70,000 = C (1.6254)

C = 43,065.98

Answer 2

"How does the answer 60,000=P(1.7410) come from the equation 60,000 = P(1+0.02)^28? I need to see the whole equation."

 

To answer this part of the question: The (1.7410)=(1+0.02)^28. It is simply restated.

To figure this out just take the 28th root of 1.7410. On your calculator just enter 1.7410 Y^x^(1/28) You should get an answer like 1.01999994935