Question

If, at the end of two years, a savings account has a balance of $1,172.60, and the interest rate is compounded monthly at 3.2%, then what is the original amount deposited two years ago?

Answer 1

$1101

Explanation:

Given data

A= $1,172.60

R= 3.2 = 0.032

t= 2

The expression for compound interest is

A= P(1+r)^t

Substitute

1172.60=P(1+0.032)^2

1172.60=P(1.032)^2

1172.60=P1.065

Divide both sides by 1.065

1172.60/1.065= P

P=$1101

Hence the original amount is $1101