Question

Estelle opened a savings account 3 years ago. The account earns 12% interest, compounded quarterly If the current balance is $600.00, how much did she deposit initially? Round your answer to the nearest cent.

Answer 1

Compund interest formula:

In this case:

A = 600

r = 12% = 0.12

t = 3 (years)

n = 4 (quarterly)

P = unknown

$600\text{ = P(1 + }\frac{0.12}{4})^{4\cdot3}=P(1.03)^{12}$$P\text{ = }\frac{600}{1.425760887}=420.8279281$

P = 420.8279281

Rounded to the nearest cent:

P = 420.83

Answer: 420.83