Natalie opened a bank account that earns 2.5% simple interest. If her account earned $180 over the next ten years, how much was Natalie's initial deposit when she opened the account?

Question

Bobo

Mathematics

29 December, 10:24

Natalie opened a bank account that earns 2.5% simple interest. If her account earned $180 over the next ten years, how much was Natalie's initial deposit when she opened the account?

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Ebony · Answer 1

The present value of Natalie's investment will be given by:

FT=PV (1+r) ^n

where:

FT=future value

PV=present value

r=rate

n=number of perionds

thus substituting our values we shall have:

FV=$180

PV=?

r=2.5%=0.025

n=10 years

180=PV (1+0.025) ^10

PV=180 (1.025) ^-10

PV=140.62

Thus the initial amount was $140.62