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11 September, 12:05

Determine the present value P you must invest to have the future value A at simple interest rate r after time t. A $9000.00, r 10.0%, t 3 months (Round up to the nearest cent.)

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  1. 11 September, 12:24
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    P = $6923

    Step-by-step explanation:

    The simple interest formula is given by

    1) I = principal * interest rate * time period

    where I is the interest

    The amount due after the time period is given by:

    2) T = principal + I

    After three months, you have $9.000, so T = 9000. The present value P is the principal. We have that:

    9000 = P + I

    I = 9000 - P

    In our problem, we have that the time period is 3 months and out interest rate is 10%.

    Replacing in 1)

    9000 - P = P*0,1*3

    9000 = 0.3P + P

    1.3P = 9000

    P = $6923

    So the present value P is $6923
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