Shawn earned some money doing odd jobs last summer and put it in a savings account that earns 10% interest compounded monthly. After 4 years, there is 1,000.00 in the account. How much did Shawn earn doing odd jobs?

Solution

S ha w n 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 10% in t eres t co m p o u n d e d m o n t h l y . A f t er 4 ye a rs, t h ere i s 1, 000.00 in t h e a cco u n t . Ho w m u c h d i d S ha w n e a r n d o in g o dd j o b s ?

Principal : 671.43

Solution steps

Translate the problem into an equation:

1000 = P (1 + \frac{0.1}{12})^{12 \cdot 4}

Solve for

P, 1000 = P (1 + \frac{0.1}{12})^{12 \cdot 4} : P = 671.43

Principal : 671.43