Question

Todd currently has $5,000. What was the value of his money four years ago if he's earned
4 percent interest each year?

Answer 1

We need to subtract the four percent from each year that his money has been in the bank (or wherever, I just assume it's a bank) If he's earned four percent each year, over the course of four years, than his money is 1.16 times as much as it was before (because a number times 1 remains the same)

Since we're going back in time, how do you think we will calculate it? it raised by 16% over the years, which means, going back, it will have lowered 16%. If we can multiply the 5,000 by the reverse number (which will be in decimals), we can find what his money used to be.