Question

Erik opened a savings account 7 years ago the account earns 4% interest compounded monthly if the current balance is 300.00 how much did he deposit initially

Answer 1

The formula for compound interest is

`A=P(1+r)^t`

Where

A = final amount

P = principle amount

r = interest rate

t = period of time.

Now in our case,

A = 300

P = unknown

r = 4/100 0.04

t = 7 years

Putting the above values in the formula gives

`300=P(1+0.04)^7`

Solving for P gives

`(300)/(\mleft(1+0.04\mright)^7)=P`
`\therefore P=227.975`

Hence, Erki has initially deposited $227.975.