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.
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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?
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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?
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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?
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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?
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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?
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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
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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?
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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