Question

Find the present value, using the future value formula and a calculator. Future value is $6,000 in two years at 9.5% simple interest. Round your answer to the nearest cent (two decimal places). Enter only the number without $ sign.

Answer 1

The present value of $6,000 due in two years at 9.5% simple interest is $5042.02. This was calculated by isolating the Present Value in the simple interest formula and solving for it.

Step-by-step explanation:

To find the present value using the future value formula and a calculator, we can use the formula of simple interest to work backwards. Given the future value (FV) is $6,000, the interest rate (r) is 9.5%, and the time (t) is two years, we can use the simple interest formula:

Future Value = Present Value + (Present Value × interest rate × time)

Let's isolate the Present Value (PV) in this formula:

PV + (PV × 0.095 × 2) = $6,000

Now, we calculate the PV:

PV × (1 + 0.095 × 2) = $6,000

PV × (1 + 0.19) = $6,000

PV × 1.19 = $6,000

PV = $6,000 / 1.19

PV = $5042.02

So, rounding to the nearest cent, the present value is $5042.02.