Question

When Madiha was born, her aunt opened a certificate of deposit in her honor to help send her to college someday. now at the age of 18, there is $31,066 in Madiha's account. how much did her aunt originally invest if the interest rate was 6.5%? (round to the nearest dollar)

A.$375
B.$12,500
C.$10,000
D.$8,000

Answer 1

C.$10,000

Explanation:

Let X be the amount of initial investment, 6.5% be the compound interest, n=18years and $31,066 as the final amount:

#Using compound interest:

`A=P(1+i)^n\\\\\Where \ A=31066,i=6.5\%, n=18,P=X\\\\31066=P(1+6.5\%)^(18)\\\\31066=P(1.065)^(18)\\\\P=(31066)/(3.106654)\\\\P\approx10000`

Hence, the amount initially ionvested is $10,000