Question

How do you use the formula to solve these problems: 5%, for 8 years and the final value is $3500?

Answer 1

Principal amount `=$.2,500`

Explanation:

Final Value `$.3500`
Number of Years `n=8`
Rate of Interest `r=5% = 0.05`
Principal amount `=p`
Interest amount `=I`
Final amount `p+I`

The formula to calculate Interest is `=pxxnxxr`

`pxxnxxr=I`

Add p to both sides. You get the final amount. Both sides are equal

`p+[pxxnxxr]=I + p`

In our problem `I + p =$3,500`

Now substitute all the known values in the equation.

`p+[pxx8xx0.05]=3500`
`p+0.4p=3500`
`1.4p=3500`
`p=3500/1.4=2500`

Principal amount `=$.2,500`