SOLUTION: How much principal should you invest at 4% in order to have $3,000 for a vacation to Europe in 3 years? Someone told me to use 3,000/1.125 because this is a logarithm problem, b

Question 196040: How much principal should you invest at 4% in order to have $3,000 for a vacation to Europe in 3 years?
Someone told me to use 3,000/1.125 because this is a logarithm problem, but I don't understand how I get the 1.125. Thank you for your help.

Answer by ankor@dixie-net.com(22740) (Show Source): You can put this solution on YOUR website!
How much principal should you invest at 4% in order to have $3,000 for a vacation to Europe in 3 years?
:
thats essentially what you are doing, here's how that came about:
:
Use the compound interest formula which pretty simple since it is compounded yearly
:
P*(1+r)^t = A
Where
P = the principal
r = interest rate (.04)
A = Accumulated amt (3000)
t = time (3 yrs)
:
P*(1.04)^3 = 3000; find 1.04^3 on your calc, you don't need logs
:
P*1.124864 = 3000; (they rounded it to 1.125)
;
P =
P = $2,666.99 invested to increase to 3000 after 3 yrs
;
;
Check on a calc: enter 2666.99(1.04^3) = 3000

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