Using the Compound Interest Formula to Solve for the Principal

Avg difficulty 2.5

A 529 Plan is a college-savings plan that allows relatives to invest money to pay for a child’s future college tuition; the account grows tax-free. Lily wants to set up a 529 account for her new granddaughter and wants the account to grow to $40,000 over 18 years. She believes the account will earn 6% compounded semi-annually (twice a year). To the nearest dollar, how much will Lily need to invest in the account now?

OpenStax Algebra and Trigonometry 2e, 6.1 Exponential Functions, exercise 27

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Adapted from College Algebra © 2021 Rice University. Licensed under CC BY 4.0. Sources: College Algebra 2e, Algebra and Trigonometry 2e, Precalculus 2e, College Algebra with Corequisite Support 2e. Imported at revision 4922e46.