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7. For the compound interest loan whose terms are given below, find the principal required to reach the given future value at the end of the specified time. Future value: $3500 Interest rate: 3.8% Compounding: Continuously Time: 1.5 years Principal: $

User Emmanuel N
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1 Answer

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In order to calculate the principal, we can use the formula for interest compounded continuously:


A=P\cdot e^(rt)

Where A is the final amount after t years, P is the principal, r is the interest rate and e is a constant equal to 2.7183.

So we have:


\begin{gathered} 3500=P\cdot2.7183^(0.038\cdot1.5) \\ 3500=P\cdot1.058656 \\ P=(3500)/(1.058656)=3306.08 \end{gathered}

So the principal is $3306.08.

User MoonFruit
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