Question

An account is compounded continuously at 4.5% interest. What was the initial amount deposited if after 8 years it is worth $1720?

Answer 1

9514 1404 393

Answer:

$1200.00

Explanation:

The balance is given by the formula ...

A = Pe^(rt) . . . . . principal P invested at annual rate r for t years

Using your numbers, we can find P to be ...

P = Ae^(-rt) = $1720·e^(-0.045·8) = $1720·e^-0.36

P ≈ $1200.00