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Popular Word Problems >

Pedro opened a savings account 8 years ago. The account earns 7% interest, compounded monthly. If the current balance is 800.00, how much did he deposit initially?

Solution

P e d ro o p e n e d a s a v in g s a cco u n t 8 ye a rs a g o . T h e a cco u n t e a r n s 7% in t eres t, co m p o u n d e d m o n t h l y . I f t h e c u rre n t ba l an ce i s 800.00, 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 : 457.71

Solution steps

Translate the problem into an equation:

800 = P (1 + \frac{0.07}{12})^{12 \cdot 8}

Solve for

P, 800 = P (1 + \frac{0.07}{12})^{12 \cdot 8} : P = 457.71

Principal : 457.71

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