Question

Determine the present value, P, you must invest to have the future value, A, at simple interest rate r after time t. Round answer to the nearest dollar.

A = $196.00
r = 10%
t = 4 years

Answer 1

find P given A
P=A[((1+i)^n)-1]÷[i (1+i)^n]
where n=t=4 and r=i

196.00 [(1.1^4)-1]÷[0.1 (1.1^4)]
=196(0.4641÷0.14641)
=621.29