Question

What is the principal from which $225 can be withdrawn at the end of each month 10 years if interest is 5% compounded quarterly?

Answer 1

Answer:

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Answer 2

The principal amount is $16427.16.

Step-by-step explanation:

$225 can be withdrawn from the investment at the end of every month for 10 years.

So, the principal will grow to $(225 × 10 × 12) = $27000.

Let the principal be $x and it will grow to $27000 after 10 years compounded quarterly at the APR of 5%.

So, we can write,

$27000 = x(1 + \frac{5}{4 \times 100} )^{10 \times 4}$

⇒ x = $16427.16

Therefore, the principal amount is $16427.16. (Answer)