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Popular Word Problems >

Marshall opened a savings account 3 years ago. The account earns 2% interest, compounded quarterly. If the current balance is 300.00, how much did he deposit initially?

Solution

M a rs ha ll o p e n e d a s a v in g s a cco u n t 3 ye a rs a g o . T h e a cco u n t e a r n s 2% in t eres t, co m p o u n d e d q u a r t er l y . I f t h e c u rre n t ba l an ce i s 300.00, 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 : 282.57

Solution steps

Translate the problem into an equation:

300 = P (1 + \frac{0.02}{4})^{4 \cdot 3}

Solve for

P, 300 = P (1 + \frac{0.02}{4})^{4 \cdot 3} : P = 282.57

Principal : 282.57

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