Raymond earned some money doing odd jobs last summer and put it in a savings account that earns 3% interest compounded annually. After 5 years, there is 100.00 in the account. How much did Raymond earn doing odd jobs?

Solution

R a y m o n d 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 3% in t eres t co m p o u n d e d ann u a ll y . A f t er 5 ye a rs, t h ere i s 100.00 in t h e a cco u n t . Ho w m u c h d i d R a y m o n d e a r n d o in g o dd j o b s ?

Principal : 86.26

Solution steps

Translate the problem into an equation:

100 = P (1 + \frac{0.03}{1})^{1 \cdot 5}

Solve for

P, 100 = P (1 + \frac{0.03}{1})^{1 \cdot 5} : P = 86.26

Principal : 86.26