Question

Pierce currently has $10,000. What was the value of his money five years ago if he has earned 5 percent interest each year?

Answer 1

The first answer is correct, if you go back by 5% each year you will see that.

Answer 2

Answer:

$ 7,835.26

Step-by-step explanation:

Let x be the value of his money five years ago,

Given,

Annual rate of interest = 5 %,

Time = 5 years,

So, the amount after 5 years,

$A=x(1+\frac{5}{100})^5$

$=x(1+0.05)^5$

$=x(1.05)^5$

According to the question,

$x(1.05)^5=10000$

$\implies x = 7835.262\approx 7835.26$

Hence, the value of his money five years ago was $ 7,835.26.