The principal amount of the savings is $15111.6
How to determine the principal amount?
The given parameters are:
- Interest rate, r = 2.8%
- Amount, A = $25,000
- Time, t = 18 years
- Number of times compounded, n = 12 i.e. monthly
Amount is calculated using:
A = P(1 + r/n)^nt
So, we have:
25000 = P(1 + 2.8%/12)^(12 * 18)
Make P the subject
P = 25000/(1 + 2.8%/12)^(12 * 18)
Evaluate the expression
P = 15111.6
Hence, the principal amount is $15111.6
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