Albert earned some money doing odd jobs last summer and put it in a savings account that earns 5% interest compounded annually. After 7 years, there is 400.00 in the account. How much did Albert earn doing odd jobs?

Solution

A l b er t 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 5% in t eres t co m p o u n d e d ann u a ll y . A f t er 7 ye a rs, t h ere i s 400.00 in t h e a cco u n t . Ho w m u c h d i d A l b er t e a r n d o in g o dd j o b s ?

Principal : 284.27

Solution steps

Translate the problem into an equation:

400 = P (1 + \frac{0.05}{1})^{1 \cdot 7}

Solve for

P, 400 = P (1 + \frac{0.05}{1})^{1 \cdot 7} : P = 284.27

Principal : 284.27