Math Problem Statement
135 years ago, your great-great grandmother lost $75 playing bingo in Oley, Pennsylvania. If she had not been tempted to gamble on bingo, but instead had deposited the $75 in a savings account earning 2.45% compounded annually, how much would be in the account now?
Solution
To calculate how much the $75 would have grown to after 135 years at an interest rate of 2.45% compounded annually, we can use the formula for compound interest:
Where:
- is the final amount
- is the initial principal (the $75)
- is the annual interest rate (2.45% or 0.0245)
- is the number of times the interest is compounded per year (for annual compounding, )
- is the number of years (135 years)
Substituting the given values into the formula:
Now, I'll calculate the amount .If your great-great-grandmother had deposited the $75 in a savings account earning 2.45% compounded annually, after 135 years, the amount in the account would now be approximately $1,968.69.
Would you like more details, or do you have any questions?
Here are five related questions:
- How would the total amount change if the interest were compounded monthly instead of annually?
- What would happen if the interest rate were slightly higher or lower?
- How much would be accumulated in half the time (67.5 years)?
- How does inflation affect the value of $1,968.69 over 135 years?
- What if she had deposited $75 every year for 135 years?
Tip: When interest is compounded more frequently, the total accumulation grows faster due to more frequent application of interest on interest.
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Math Problem Analysis
Mathematical Concepts
Compound Interest
Exponential Growth
Percentage Calculation
Formulas
A = P(1 + r/n)^(nt)
Theorems
Compound Interest Theorem
Suitable Grade Level
Grades 9-12
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