Finite Math and Applied Calculus (6th Edition)

Published by Brooks Cole
ISBN 10: 1133607705
ISBN 13: 978-1-13360-770-0

Chapter 2 - Section 2.1 - Simple Interest - Exercises - Page 132: 7

Answer

$PV=\$ 9,090.91$

Work Step by Step

The future value of an investment of $PV$ dollars at an annual simple interest rate of $r$ for a period of $t$ years is $FV=PV(1+rt)=PV+INT$ . Given: r = 0.02 (2$\%$ per year), FV= 10,000, t = 5 (years), we solve $FV=PV(1+rt)$ for PV: (divide both sides by (1+rt) ) $ PV=\displaystyle \frac{FV}{(1+rt)}=\frac{10000}{1+(0.02)\cdot 5}\approx$9090.90909091, rounded to the nearest cent: $PV=\$ 9,090.91$
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