example 3: present value for simple interest

if you can earn 6% interest, what lump sum must be deposited now so that its value will be $3500 after 9 months?

Question

example 3: present value for simple interest

if you can earn 6% interest, what lump sum must be deposited now so that its value will be $3500 after 9 months?

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "explain_then_answer", "quick" ], "needs_drawing": false, "concepts_used": [], "new_concepts": [ "Simple Interest", "Present Value" ], "current_concepts": [ "Simple Interest", "Present Value" ] } ## Identify given parameters $$ \begin{aligned} A &= 3500 \ r &= 0.06 \ t &= \frac{9}{12} = 0.75 \end{aligned} $$ ## Apply present value formula $$ \begin{aligned} P &= \frac{A}{1 + rt} \ P &= \frac{3500}{1 + 0.06 \times 0.75} \end{aligned} $$ ## Calculate principal amount $$ \begin{aligned} P &= \frac{3500}{1 + 0.045} \ P &= \frac{3500}{1.045} \ P &\approx 3349.28 \end{aligned} $$ $P \approx \$3349.28$ { "subject": "Mathematics", "question_type": "Free Response", "knowledge_point": [ "Mathematics", "Algebra", "Simple Interest" ] }

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QUESTION IMAGE

Question

Explanation:

Identify given parameters

Apply present value formula

Calculate principal amount

Answer: