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Answer:
The initial amount of investment was $7,822
Step-by-step explanation:
The formula for compound interest, including principal sum is:
, where
- <em>A</em> is the future value of the investment/loan, including interest
- <em>P</em> is the principal investment amount
- <em>r</em> is the annual interest rate (decimal)
- <em>n</em> is the number of times that interest is compounded per unit t
- <em>t</em> is the time the money is invested or borrowed for
Let us use this rule to solve the question
∵ Sam invests a sum of money in a retirement account with a fixed
annual interest rate of 7% compounded quarterly
∴ <em>r </em>= 7% = = 0.07
∴ <em>n</em> = 4 ⇒ compounded quarterly
∵ After 13 years, the balance reaches $19,280.02
∴ <em>A</em> = 19,280.02
∴ <em>t </em>= 13
Substitute these values in the rule above to find <em>P</em>
∵
∴
→ Divide both sides by
∴ 7,821.99888 = <em>P</em>
→ Round it to the nearest dollar
∴ 7,822 = <em>P</em>
∴ <em>P</em> = $7,822
∴ The initial amount of investment was $7,822.