COMPOUND INTEREST 1A

Salama invested a certain amount of money in a bank which gives an interest rate of 10% compounded annually. How much did she invest at the start if she got 100,000 sh at the end of 4 years?

solution

n=4, T=1, R=10%, A₄=100000, P=?

A_n = P(1 + ^RT/100)ⁿ

A₄ = P(1 + ^(10x1)/100)⁴

A₄ = P(1 + ¹⁰/100)⁴

A₄ = P(¹⁰⁰/100 + ¹⁰/100)⁴

A₄ = P(¹¹⁰/100)⁴  But A₄=8000,

100,000 = P(1.1)⁴  

100,000 = 1.4641P

100,000  =  1.4641P

1.4641        1.4641

100,000  =  P    [use math tables to divide if you like]

1.4641

P = 68301.35 [to 2 d.p]

Hence at the start she invested Tsh 8264.46

TRY THIS……………………..

Salma invested a certain amount of money in a bank which gives an interest rate of 10% compounded annually. How much did she invest at the start if she got 150,000 sh at the end of 3 years?