Ava opened a savings account 2 years ago. The account earns 6% interest, compounded quarterly. If the current balance is 1,000.00, how much did she deposit initially?

Solution

Ava opened a savings account 2 years ago. The account earns 6% interest, compounded quarterly. If the current balance is 1, 000.00, how much did she deposit initially?

Solution

Principal : 887.71

Solution steps

Translate the problem into an equation:

1000 = P (1 + \frac{0.06}{4})^{4 \cdot 2}

Solve for

P, 1000 = P (1 + \frac{0.06}{4})^{4 \cdot 2} : P = 887.71

Principal : 887.71

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