Question

Jenna bought a savings certificate that earned 2% simple interest per year. She earned a total of $100 in interest over 4 years. What was the initial value of the certificate?

Answer 1

Answer: Below

Explanation:

An interesting part of this problem is that it derives off of Exponential growth formulas.

So by plugging in the values in the Exponential growth:

`y = x(1+0.02)^(4)`

`y = x(1.02)^(4)`

What's important is we know the increasing factor, so:

`(1.02)^(4) = 1.0824`

So now we know 8.24% of something is equal to 100. We can use this to find x, which is our initial value.

x * 0.0824 = 100
x = 100/0.0824

x = 1213.59

The answer is approximately 1213.59