Question

3. How much money did Deepinder invest on June 7th 2018 into an account earning 4.5% p.a. if he had $9,039.10 in the account on September 14th 2020?

Answer 1

Note: It is assumed that Interest is Compounded Annually. Therefore, Interest will be credited on June 7th every year and partial interest on the last day i.e. September 14th 2020.

PV as on June 7th 2020 = Value as on September 14th 2020/[1+(Interest Rate*Time Period in months/12)] = 9039.1/[1+(0.045*3.25/12)] = 9039.1/1.0121875 = $8930.26

Amount deposited on June 7th 2018 = PV of Above Amount on June 7th 2018 = Above Value/[(1+Interest Rate)^Number of Years] = 8930.26/[(1+0.045)^2] = 8930.26/1.092025 = $8177.71

Note: If we assume Simple Interest, then, Amount Deposited = 9039.1/[1+(0.045*25.25/12)] = $8257.24