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Popular Word Problems >

Isabella opened a savings account 2 years ago. The account earns 5% interest, compounded quarterly. If the current balance is 400.00, how much did she deposit initially?

Solution

I s ab e ll a o p e n e d a s a v in g s a cco u n t 2 ye a rs a g o . T h e a cco u n t e a r n s 5% in t eres t, co m p o u n d e d q u a r t er l y . I f t h e c u rre n t ba l an ce i s 400.00, 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 : 362.16

Solution steps

Translate the problem into an equation:

400 = P (1 + \frac{0.05}{4})^{4 \cdot 2}

Solve for

P, 400 = P (1 + \frac{0.05}{4})^{4 \cdot 2} : P = 362.16

Principal : 362.16

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