Question

1. Find the present value of an investment that is worth $19,513.75 after

earning 3% simple interest for 5 & 1/2 (5.5) years.

2. Mr. Clopu buys an 18-month CD that pays 4 3/4% simple interest for $5,000. Find the value of the CD at the end of its term.

Answer 1

1) To get the present value, we need to get the amount after 5.5years

Amount = Principal + Interest

Interest = PRT/100

Interest = $19,513.75*3*5.5/100

Interest = 321,976.875/100

Interest = $3219.76875

Amount = $19,513.75+$3219.76875

Amount = 22,733.51875

Hence the present value is $22,733.51875

2) Simple Interest = PRT/100

Simple Interest = 5000*(4 3/4)* 18/12*100

Simple interest = 5 * 19 * 18/4*12

Simple interest = 1710/48

Simple interest =35.625

Amount = 5000 + 35.625

Amount = $5035.625

Hence the present value is $5035.625