Money is invested into an account earning 4.25% interest compounded annually. If the accumulated value after 18 years will be $25,000, approximately how much money is presently in the account?

a.

$5,875

b.

$11,820

c.

$19,125

d.

$23,960

We are given with the following:

Effective annual interest, i = 0.0425

Future worth, F = $25000

Number of years, n = 18

We use the formula to solve for the present worth of the money:

P = F / (1 + i) ^n

P = 25000 / (1 + 0.0425) ^18

P = 11818.73

The closest answer is:

b.

$11,820