Coordinate Algebra

Question

how much money must be deposited into an account paying 7% annual interest compounded yearly to have a balance of $1000 after six years

Answer 1

The formula for solving compound interest equations is A (amount) = P(1 + r/n) ^tn

P means Principle , or the amount of money you started with. In this question P is what we are solving for .

r means rate of interest - in this question 7% is our rate of interest . We must convert this into a decimal by dividing by 100 . r = .07

n means the amount per year that the interest is compounded, quarterly means 4 times a year , annually means once a year in this question, interest is compounded annually so, n= 1

t is the amount of years - in this question we want to know what our initial prince would be if we started with $1000 after six years so , t= 6

Finally , we know that we finish with 1000 dollars so A = 1000

now that we know all our values , we plug them back into the formula and solve on our calculator .

A(1000)=P(?) x (1+ .07)^ (.07 x 6 )

we do the operations inside the parentheses so

1000 = P x (1.07) ^ .42

to find P we must now Divide the 1.07 ^.42 by 1000 to get our final answer .

The ^ symbolizes an exponent- there is an option is enter this on your calculator to caluate your final answer! P = (1000/ (1.07)^.42)

Answer 2

Answer 3