An investment increases by 5% each year. After 2 years, it is worth $2205. What was the initial value?

Question

13. An investment increases by 5% each year. After 2 years, it is worth $2205. What was the initial value? a. $2100 b. $2315.25 c. $2000 d. $2420

SnapAndSolve AI · Accepted Answer

To find the initial value, we use the formula for compound interest: Final Amount = Initial Amount × (1 + Rate)^Time.

Given: Final Amount = $2205, Rate = 5% = 0.05, Time = 2 years.

Let Initial Amount = P.

Then, $2205 = P × (1 + 0.05)^2.

$2205 = P × 1.1025.

P = $2205 / 1.1025.

P = $2000.

Answer: c. $2000

Answer