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by nidhis.1408 » Wed Nov 23, 2011 12:44 pm
An amount is deposited into an account accruing interest annually at a fixed percentage rate. It is valued at $900 in the third year (after interest has compounded twice), and $1080 in the fourth year (after interest has compounded three times). What is the original amount?
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by vishal.pathak » Wed Nov 23, 2011 12:57 pm
nidhis.1408 wrote:An amount is deposited into an account accruing interest annually at a fixed percentage rate. It is valued at $900 in the third year (after interest has compounded twice), and $1080 in the fourth year (after interest has compounded three times). What is the original amount?
Amount = Principal(1+r/100)^n

900 = Principal(1+r/100)^2 ................(1)

1080 = Principal(1+r/100)^3 .............. (2)

Divide (2) by (1)

1080/900 = (1+r/100)

or (1+r/100) = 1.2

Put this in 1

900 = Principal (1.2)^2

or Principal = 900/1.44 = 625 IMO
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