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Popular Word Problems >

Shawn opened a savings account 1 year ago. The account earns 4% interest, compounded continuously. If the current balance is 100.00, how much did he deposit initially?

Solution

S ha w n o p e n e d a s a v in g s a cco u n t 1 ye a r a g o . T h e a cco u n t e a r n s 4% in t eres t, co m p o u n d e d co n t in u o u s l y . I f t h e c u rre n t ba l an ce i s 100.00, 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 : 96.08

Solution steps

Translate the problem into an equation:

100 = P e^{0.04 \cdot 1}

Solve for

P, 100 = P e^{0.04 \cdot 1} : P = 96.08

Principal : 96.08

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