Question

Determine the present value P that must be invested to have the future value A at simple interest rate r after time t.A = $6000, r = 13%, t = 2 years.I'm having trouble with this question. Can I have some help? I just need like... a step by step on how to solve this question, that's all, i guess. Oh, and the answer would be helpful too!! Math isn't my strong suit, so yeah!! *Sheepish laugh*

Answer 1

To answer this we must use the simple interest formula

`A=P(1+rt)`

A is the future amount after interest

P is the initial amount you invest

r is the annual interest rate and

t is the amount of years

Remember that 13% means 13 out of 100, or 13/100=0.13

Let's replace values in formula to find P

`\begin{gathered} A=P(1+rt) \\ P=(A)/((1+rt))\text{ We left P alone} \\ \\ P=(6000)/((1+0.13(2)))=(6000)/(1+0.26)=(6000)/(1.26)=4761.9 \end{gathered}`

So, the initial value has to be 4761.9