A student will have $1966 in the account when she graduates. The account earns 7% per year and is compounded quarterly. How much did her parents deposit in the savings account when she started high school?

1 Answer
Dec 27, 2017

P~~$1489.47

Explanation:

A=P(1+r/n)^(nt)
This formula tells us that the final amount of money, A, is dependent on the principal, P, the rate, r, in decimal, the number of times it is compounded in a year, n, and the number of years it is compounded, t.

From the problem statement, here's what we know:

A=1966
r=.07
n=4 --> This is because it is compounded quarterly
t=4 --> Assume 4 years in high school
Need to find P.

1966=P(1+.07/4)^(4*4)

P=1966/((1+.07/4)^(4*4))

P~~1489.47