From the question we were given the formular:
A = P(1 + r)^t
Where:
A is the future value of P in dollars
r is the annual interest rate
t is the period in years.
(a) We are asked to solve the formula for P
A = P(1 + r)^t
A = (1 + r)^t * P
P = A
(1 + r)^t
(b) How much would you have to deposit today in order to have $5000 in 4 years in abank account that pays 5% annual interest?
Given:
A = $5000
r = 5%
t = 4 years
P = A
(1 + r)^t
P = 5000
(1 + 5/100)^4
P = 5000
(1 + 0.05)^4
P = 5000
(1.05)^4
P = 5000
1.2155
P = $4113.53