Given amount and interest rate, find principal

In summary, to have $60,000 in 8 years with an interest rate of 9%, you would need to deposit $28,921.79 in the bank today, assuming the interest is compounded annually.
  • #1
brownrebecca333
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Homework help please: If I want to have $60,000 in 8 years, how much would I need to deposit in the bank today if the account pays an interest rate of 9%?
 
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  • #2
Re: Please help me

brownrebecca333 said:
Homework help please: If I want to have $60,000 in 8 years, how much would I need to deposit in the bank today if the account pays an interest rate of 9%?

Simple or compounded interest? If compounded, what is the compounding period?
 
  • #3
brownrebecca333 said:
Homework help please: If I want to have $60,000 in 8 years, how much would I need to deposit in the bank today if the account pays an interest rate of 9%?
60000/((1 + .09/f)^(8*f)) where f = compounding frequency
 

Related to Given amount and interest rate, find principal

1. How do I calculate the principal when given an interest rate and amount?

To calculate the principal, you can use the formula P = A / (1 + r)^n, where P represents the principal, A represents the amount, r represents the interest rate, and n represents the number of compounding periods. Plug in the values for A, r, and n to solve for P.

2. What is the difference between simple and compound interest?

Simple interest is calculated based on the original principal amount, while compound interest takes into account the accumulated interest from previous periods. This means that compound interest will result in a higher total amount paid over time compared to simple interest.

3. How does the interest rate affect the principal amount?

The interest rate directly affects the principal amount by determining the amount of interest that will be added to the principal over time. A higher interest rate will result in a higher principal amount.

4. Can the principal amount change over time?

Yes, the principal amount can change over time if there are additional deposits or withdrawals made to the account. However, the initial principal amount will remain the same unless there are any changes in the interest rate or compounding periods.

5. How can I determine the principal amount using a financial calculator?

Most financial calculators have a function specifically for calculating the principal amount. To use this function, input the values for the amount, interest rate, and number of compounding periods, and the calculator will automatically solve for the principal amount.

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