Question

How much must you deposit in an account that pays 7% annual interest compounded yearly to have a balance of $550 after 5 years?

550 is not the a in y=a*b^x, 550 is y but I am looking for a. I have 550=a(1.07)^5 but what do I do next

Answer 1

• $392 (rounded)

Explanation:

You have this correct:

• 550 = a(1.07)⁵

The next step:

• 550 = a*1.4 (rounded)

• a = 550/1.4
• a = 392 (rounded to the whole number)