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Find the principal amount invested if the amount in a semi-annually compounded account with a 5.05% interest rate is $16,360.93 after 60 months.

Answer :

mathmate
Present value (principal amount), P 
Future value, F = 16360.93
n=60/6=10compound
interest per period, i = 0.0505/2 = 0.02525

Using compound interest formula, 
F=P(1+i)^n
or
16360.93=P(1+0.0505/2)^10

Solve for P=16360.93/1.02525^10= $12750.00

Answer: The principal amount is $12750.00   (to the nearest cent)

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