P = Po(1+r)^n.
Po = P / (1+r)^n.
P = $130,000 = Principal after 20 yrs.
Po = Initial principal or deposit.
r = (14%/2) / 100% = 0.07 = Semi-annual
% rate expressed as a decimal.
n = 2Comp./yr * 20yrs = 40 Compounding
periods.
Plug the calculated values into the given Eq and solve for Po.
Ray Long wants to retire in Arizona when he is 70 years
of age. Ray is now 50. He believes he will need $130,000
to retire comfortably. To date, Ray has set aside no
retirement money. Assume Ray gets 14% interest
compounded semiannually. How much must Ray invest
today to meet his $130,000 goal?
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