How much money should be invested now (rounded to the nearest cent), called the initial investment, in a Treasury Bond investment that yields 5.75% per year, compounded monthly for 7 years, if you wish it to be worth $12,000 after 7 years?

Question

Mercury · Answer

$$A = P(1+\frac{ r }{ n })^{nt}$$where A is the final amount, P is the principal, r is the interest rate as a decimal, n is the # of times compounded per year, and t is time in years

in this case, A = 12,000, r is 0.0575, n is 12 (since it compounds monthly, it compounds 12 times per year), and t is 7 years. plug these values in and solve for P.