Question

If the interest rate is 3% and a total of $4,370.91 will be paid to you at the end of 3 years, what is the present value of the sum

Answer 1

The present value (or initial investment) is $4000.00

Explanation:

I'm going to assume that the correct formula here is

`A(t)=P(1+r)^t`

and we are looking to solve for P, the principle investment. We know that A(t) is 4370.91; r is .03 and t is 3:

`4370.91=P(1+.03)^3` and

`4370.91=P(1.03)^3` and

4370.91 = 1.092727P so

P = 4000.00