The amount deposited initially is $ 706.22
Solution:
The formula for amount using compound interest is given as:
[tex]A = p(1+\frac{r}{n})^{nt}[/tex]
Where,
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per unit t
t = the time the money is invested or borrowed for
From given,
t = 7 years
A = 1000
P = ?
[tex]r = 5 \% = \frac{5}{100} = 0.05[/tex]
n = 4 (since compounded quarterly)
Substituting the values we get,
[tex]1000 = p(1+\frac{0.05}{4})^{4 \times 7}\\\\1000 = p(1+\frac{0.05}{4})^{28}\\\\1000 = p(1+0.0125)^{28}\\\\1000 = p(1.0125)^{28}\\\\1000 = p \times 1.4159923\\\\p = \frac{1000}{1.4159923}\\\\p = 706.2185 \approx 706.22[/tex]
Thus amount deposited initially is $ 706.22
