Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.3 Simple Interest - Exercise Set 8.3: 24

Answer

$P \approx \$10,158.73$

Work Step by Step

RECALL: The formula for the future value $A$ is: $A=P(1+rt)$ where P = principal amount borrowed r = interest rate per year t = time in years Divide $(1+rt)$ on both sides of the formula given above to obtain: $\dfrac{A}{1+rt}=P$ Thus, the principal or present value $P$ can be found using the formula above. Use the formula above and the given values in the problem to obtain: $P=\dfrac{\$16000}{1+11.5\% \cdot 5} \\P=\dfrac{\$16000}{1+0.115 \cdot 5} \\P=\dfrac{\$16000}{1+0.575} \\P=\dfrac{\$16000}{1.575} \\P=\$10,158.73016 \\P \approx \$10,158.73$
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