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Popular Word Problems >

Terrell opened a savings account 10 years ago. The account earns 1% interest, compounded monthly. If the current balance is 1,000.00, how much did he deposit initially?

Solution

T erre ll o p e n e d a s a v in g s a cco u n t 10 ye a rs a g o . T h e a cco u n t e a r n s 1% in t eres t, co m p o u n d e d m o n t h l y . I f t h e c u rre n t ba l an ce i s 1, 000.00, h o w m u c h d i d h e d e p os i t ini t ia ll y ?

Solution

Principal : 904.88

Solution steps

Translate the problem into an equation:

1000 = P (1 + \frac{0.01}{12})^{12 \cdot 10}

Solve for

P, 1000 = P (1 + \frac{0.01}{12})^{12 \cdot 10} : P = 904.88

Principal : 904.88

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