Polly earned some money doing odd jobs last summer and put it in a savings account that earns 2% interest compounded monthly. After 5 years, there is 500.00 in the account. How much did Polly earn doing odd jobs?

Solution

P o ll y e a r n e d so m e m o n ey d o in g o dd j o b s l a s t s u mm er an d p u t i t in a s a v in g s a cco u n t t ha t e a r n s 2% in t eres t co m p o u n d e d m o n t h l y . A f t er 5 ye a rs, t h ere i s 500.00 in t h e a cco u n t . Ho w m u c h d i d P o ll y e a r n d o in g o dd j o b s ?

Principal : 452.46

Solution steps

Translate the problem into an equation:

500 = P (1 + \frac{0.02}{12})^{12 \cdot 5}

Solve for

P, 500 = P (1 + \frac{0.02}{12})^{12 \cdot 5} : P = 452.46

Principal : 452.46