Question

Susan has an investment account which compounds interest annually at a rate of 3.2%. After 6 years, she has $6125 in the account. How much money did she initially place in the account? Round your answer to the nearest whole number. Do not include a $ in your answer.

Answer 1

Step 1: Let's review the information given to us to answer the question correctly:

• Interest rate (r) = 3.2% or 0.032 compounded annually

,

• Time elapsed (t) = 6 years

,

• Final balance (A) = $ 6,125

Step 2: Let's use the formula of compounded interest, to find P or the initial balance:

A = P (1 + r) ^t

6,125 = P * (1 + 0.032)^6

6,125 = P * 1,208

P = 6,125/1.208

P = $ 5,070.36

P = $ 5,070 (Rounding to the next whole number)