Question

Craig invested an amount of money in an account earning 4% annual interest compounded quarterly for 7 years. No other deposits were made and no money was withdrawn.

At the end of 7 years, the account balance was $2,169.56. What amount was the initial investment?

Answer 1

Use A = P(1 + r)^n with r = 0.04/4 = 0.01 and n = 7·4 = 28.

P = 2169.56 / (1.01)^28 ≈ 2169.56 / 1.321289701 ≈ 1642.00.

The initial investment was about $1,642.00.