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14 April, 09:59

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

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Answers (1)
  1. 14 April, 10:12
    0
    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
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