Question

Your mom opened a college fund for you when you were born. The fund had an annual interest rate of 2.5%. When you turned 18, the account had earned $4,275 in interest. What was the amount your mom deposited when you were born? Use the formula: I = Prt.

Answer 1

Given:
Interest = 4,275
interest rate = 2.5%
term = 18 years
Principal = ?

Interest = Principal * interest rate * term
4,275 = P * 2.5% * 18
4,275/ (2.5% * 18) = P
4,275 / 0.45 = P
9,500 = P

Your mom deposited 9,500 when you were born.