COMPOUND INTEREST 2

Caroline invested a certain amount of money in a bank which gives an interest rate of 20% compounded annually. How much did she invest at the start if she got 8,500 sh at the end of 3 years?

Solution

n=3, t=1, R=20%, A₃=8,500, P=?

A_n = P(1 + ^RT/100)ⁿ

A₃ = P(1 + ^(20x1)/100)³

A₃= P(1 + ²⁰/100)³

A₃ = P(¹⁰⁰/100 + ²⁰/100)³

A₃ = P(¹²⁰/100)³  But A₃=8,500

8,500 = P(1.2)³  = P(1.2x1.2x1.2)  

8,500 = 1.728P

8500  =  1.728P

1.728      1.728

8500  =  P

1.728

P = 4919/=

Hence at the start she invested Tsh 4919

TRY THIS………………..

Tushabe invested a certain amount of money in a bank which gives an interest rate of 20% compounded annually. How much did she invest at the start if she got 18,000 sh at the end of 4 years?