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Popular Word Problems >

Alexandra opened a savings account 10 years ago. The account earns 14% interest, compounded continuously. If the current balance is 8,000.00, how much did she deposit initially?

Solution

A l e x an d r a 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 14% 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 8, 000.00, h o w m u c h d i d s h e d e p os i t ini t ia ll y ?

Solution

Principal : 1972.78

Solution steps

Translate the problem into an equation:

8000 = P e^{0.14 \cdot 10}

Solve for

P, 8000 = P e^{0.14 \cdot 10} : P = 1972.78

Principal : 1972.78

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