SOLUTION: What principle will amount to 9,000 if invested at 4% compounded monthly for 6 years?

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Question 1102444: What principle will amount to 9,000 if invested at 4% compounded monthly for 6 years?
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
f = p * (1+r) ^ n

f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time periods.

you are given that:

f = 9000
r = 4% per year compounded quarterly.
n = 6 years.

your time periods will be in quarters and you need to use the rate as a decimal rather than as a percent.

your rate as a decimal = 4% / 100 = .04 per year.
divide that by 12 to get a monthly rate of .04/12
your number of quarters will be 6 * 12 = 72

you will get:

p = what you want to find
f = 9000
r = .04/12
n = 72

your formula of f = p * (1+r) ^ n becomes:

9000 = p * (1 + .04/12) ^ 72

solve for p to get p = 9000 / ((1 + .04/12) ^ 72)

this results in p = 7082.476897

that's your principal.