Question 6400
right then..fairly simple question so long as you understand what compound interest is:


Lets start with a definition: Let x = amount we start with. So,


now = x
after 1 year, we will have 1.06x ie 6% increase.
after 2 years we will have 1.06(1.06x) ie a 6% increase of last year's amount.
after 2 years we will have 1.06(1.06(1.06x)) ie a 6% increase of last year's amount... etc


so, we get a pattern forming:


now = x
after 1 year = {{{1.06x}}}
after 2 years = {{{1.06^2(x)}}} 
after 3 years = {{{1.06^3(x)}}}
after 4 years = {{{1.06^4(x)}}}
after 5 years = {{{1.06^5(x)}}} which is equal to 250000


so, {{{1.06^5(x) = 250000}}}


{{{x = 250000/(1.06^5)}}}
x = 186,814.55 rounded up to nearest cent.



jon.