Question

Your great Aunt Matilda put some money in an account for you on the day you...

Your great Aunt Matilda put some money in an account for you on the day you were born. This account pays 8% interest per year. On your 21st birthday the account balance was $5033.83. How much money did your great aunt Matilda originally put in the account?

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Answer #1

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

5033.83=P*(1.08)^21

P=5033.83/(1.08)^21

=$1000(Approx).

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