Question

Charlie is financing a new car for 5 years at 2.5% interest. At the end of the 5 years, Charlie will have paid $3000 in interest. What is the principal amount that Charlie is financing? Use I = PRT to solve the problem.

Answer 1

The multiplier = 100% + 2.5% = 102.5% = 1.025
Number of years = 5
Final value= 3000

Final value = Principal value ×
`Multiplier^((number of years))`

`3000=x (1.025)^(5)`

`(3000)/(1.025^(5) )=x`

`x=2651.56`

Hence, principal value is $2651.56