SOLUTION: Debbie plans on investing enough money so that she will have $2000 at the end of two years. How much money will she have to invest now if her money will grow according to the follo

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Question 212107: Debbie plans on investing enough money so that she will have $2000 at the end of two years. How much money will she have to invest now if her money will grow according to the following formula: 2000 = P (1.025)^4?
Answer by drj(1380) About Me  (Show Source):
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Debbie plans on investing enough money so that she will have $2000 at the end of two years. How much money will she have to invest now if her money will grow according to the following formula: 2000 = P (1.025)^4?

Step 1. Solve for P where P is the initial investment. Interest in this case is 2.5 % compounded semiannually since in this case it's compounded 4 times in 2 years
Divide by 1.025%5E4=+1.025%2A1.025%2A1.025%2A1.025=1.103812891 to both sides of equation to isolate P.
2000%2F1.103812891=P%281.025%5E4%29%2F1.025%5E4=P
Step 2. P=$1811.90