Question

You deposit into a savings account 3 years ago, and earned interest at an annual rate of eight percent. The deposit accumulated to 30,000. How much was initially deposited assuming that the interest was compounded a. annually b. semiannually c. quarterly

Answer 1

Amount =	Principal * (1+Rate)^n
n = no of periods
a. compounded annually
rate = 8%
n = 3
30000 =	Principal * (1+0.08)^3
Principal =	30000 / (1.08)^3
(1.08) ^ 3 =	1.259712
Principal =	$                                                23,814.97
b. compounded semi-annually
rate = 4%
n = 6
30000 =	Principal * (1+0.04)^6
Principal =	30000 / (1.04)^6
(1.04) ^ 6 =	1.265319018
Principal =	$                                                23,709.44
c. compounded quarterly
rate = 2%
n = 12
30000 =	Principal * (1+0.02)^12
Principal =	30000 / (1.02)^12
(1.02) ^ 12 =	1.268241795
Principal =	$                                                23,654.80

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