Question

You hope to reach $10,000 savings in 6 years in an account paying 1.5%. What is the present value?

All answers will include a $sign.

Answer 1

`P=\$9,174.31`

Explanation:

we know that

The simple interest formula is equal to

`A=P(1+rt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested or present value

r is the rate of interest

t is Number of Time Periods

in this problem we have

`t=6\ years\\ P=?\\ A=\$10,000\\r=1.5\%=1.5/100=0.015`

substitute in the formula above

`10,000=P(1+0.015*6)`

solve for P

`10,000=P(1.09)`

`P=10,000/(1.09)`

`P=\$9,174.31`