COMPOUND INTEREST H1

 

Salva 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 300,000 sh at the end of 4 years?

 

solution

 

n=4, T=1, R=10%, A₄=300,000, 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,

 

300,000 = P(1.1)⁴  

 

300,000 = 1.4641P

 

300,000  =  1.4641P

1.4641        1.4641

 

300,000  =  P    [use math tables to divide if you like]

1.4641

 

P = 204,904.04 [to 2 d.p]

 

 

Hence at the start she invested Tsh 204,904.04

 

TRY THIS……………………..

 

Sylvia 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 5 years?