steve816
  • steve816
Ryan has a savings account that pays 4.5% interest annually compounded quarterly. She has not made any deposits or withdrawals for many years. Suppose that her current balance is $4,516.32. How much money was in her account 5 years ago?
Mathematics
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SOLVED
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chestercat
  • chestercat
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arindameducationusc
  • arindameducationusc
Use compound interest formula
steve816
  • steve816
I always forget that formula xD
steve816
  • steve816
someone walk me through please!

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dan815
  • dan815
this is why i think econ is so bs okay.. they say 4.5% annual interest compounded quarterly that in no way tells you that it means that every quarter the compound interest is 4.5/4 %
arindameducationusc
  • arindameducationusc
@steve816 you there?
dan815
  • dan815
now in 5 years that means the inital money was compounded 5*4 =20 times of 4.5/4%
dan815
  • dan815
let x be the money in the beginning x*(1+4.5/4%)^20=x*(1+0.045/4)^20=4,516.32 x*(1+0.045/4)^20=4,516.32 x=4,516.32/(1+0.045/4)^20
dan815
  • dan815
you can see why this formula comes about if you try do compound x one at a time (x*(1+r)) money after 1 compound (x*(1+r))*(1+r) = x*(1+r)^2 money after 2nd compound (x*(1+r))*(1+r)*(1+r)=x*(1+r)^3 money after 3rd compound and so on . . x*(1+r)^20 = money after 20 compounds

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