Answer:
The amount of initial investment is $8695.34
Explanation:
The amount initially invested by calculated using the Present Value formula given below:
PV=FV/(1+r)^n
FV=future value of investment=$31,446.94
r=rate of return=7%
n=number of years =19 years
PV=$31446.94/(1+0.07)^19
PV=$8695.34
The reason amount invested has increased significantly was that the principal is reinvested alongside interest ,which means interest was earned from two streams , interest from the initial principal and interest on the interest.In essence,the power of compound interest is illustrated here
