COMPOUND INTEREST A1

Catherine 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 8,000 sh at the end of 3 years?

Solution

n=3, t=1, R=20%, A₃=8000, 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=8,000,

8,000 = P(1.2)³  = P(1.2x1.2x1.2)  

8,000 = 1.728P

8000  =  1.728P

1.728      1.728

8000  =  P

1.728

P = 4629.63 (to 2 d.p)

Hence at the start she invested Tsh 4629.63

TRY THIS…………………

Baba Koku 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 7,000 sh at the end of 4 years?