To determine the present value, we can use the formula for simple interest:
P = A / (1 + rt)
Given:
A = $17,000
r = 7.5% = 0.075
t = 7 years
Substituting the values into the formula:
P = $17,000 / (1 + 0.075 * 7)
Simplifying:
P = $17,000 / (1 + 0.525)
P = $17,000 / 1.525
P ≈ $11,148.76
So, you must invest approximately $11,148.76 to have a future value of $17,000 at a simple interest rate of 7.5% after 7 years.
Determine the present value P you must invest to have the future value A at simple interest rate t after time t.
A= $17,000, r=7.5% t= 7years
1 answer