Question

Pierce currently has $10,000. What was the value of his money five years ago if he has earned 5 percent interest each year?

$7,462.15
$7,835.26
$8,548.04

Answer 1

The first answer is correct, if you go back by 5% each year you will see that.

Answer 2

$ 7,835.26

Explanation:

Let x be the value of his money five years ago,

Given,

Annual rate of interest = 5 %,

Time = 5 years,

So, the amount after 5 years,

`A=x(1+(5)/(100))^5`

`=x(1+0.05)^5`

`=x(1.05)^5`

According to the question,

`x(1.05)^5=10000`

`\implies x = 7835.262\approx 7835.26`

Hence, the value of his money five years ago was $ 7,835.26.