Compound Interest - Solving for the Principal How much would have to be deposited now into an...

Compound Interest - Solving for the PrincipalCompound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

Start by writing down the compound interest formula.

Next

Compound Interest - Solving for the Principal

1 nA P i

Compound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

Now list the variables that make up the formula on the left.

Compound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

APin

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

Read through the problem and translate the information into the listed variables.

APin

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

?iPA

n

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

Continue to read through the problem and translate the information into the variables.0. 8

?

?0

AP

n

i

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

0.08 0.01

1

?

8

A

n

P

i

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

?0.08 0.08

1

1

1

000P

i

A

n

NextBack

Compound Interest - Solving for the Principal

1 nA P i

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

1 51

5

AP

i

n

NextBack

Compound Interest - Solving for the Principal

1 nA P i

Substitute the variable values into the formula.

1000?0.08 0.08

11 5 5

AP

i

n

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1 nA P i

1000?0.08 0.08

11 5 5

AP

i

n

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

NextBack

Compound Interest - Solving for the Principal

1000 1 nP i

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

NextBack

Compound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

1000 1 nP i

NextBack

Compound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

1000 1.08 nP

NextBack

Compound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

1000 1.08 nP

NextBack

Compound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

51000 1.08P

NextBack

Compound Interest - Solving for the Principal

The equation must be solved for P.

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

51000 1.08P

NextBack

Compound Interest - Solving for the Principal

Multiplication is the operation that is understood to be between the P and the .

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

51000 1.08P

51.08

NextBack

Compound Interest - Solving for the Principal

Move this to the other side by performing division (the opposite operation to multiplication).

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

5000 81 1.0P

NextBack

Compound Interest - Solving for the PrincipalHow much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

51.1 00

080 P

NextBack

Compound Interest - Solving for the Principal

Enter the calculations into your calculator.

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

51.1 00

080 P

NextBack

Compound Interest - Solving for the Principal

1000 ( 1 . 08 ) 5

1000 ( 1 . 08 ) 5

1000 ( 1 . 08 ) 5

x

y

y

or

x

or

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

51.1 00

080 P

NextBack

Compound Interest - Solving for the Principal

Round to the nearest cent.

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

5

10001.08

680.5831970

P

P

NextBack

Compound Interest - Solving for the Principal

Therefore, $680.58 would have to be deposited into the account now in order to have $1000 in 5 years.

How much would have to be deposited now into an account that earns 8% per annum compounded annually to reach $1000 in 5 years?

1000?0.08 0.08

11 5 5

AP

i

n

5

10001.08

680.5831970680.58

P

PP

Back