<PRE><B>Question 1190562</B>
the formula to use is:


f = p * (1 + r) ^ n
f is the future value
p is the present value
r is the interest rate per time period
n is the number of time periods.


an associated formula is:


i = f - p
i is the interest
f is the future value
p is the preswent value


you are given that i = 1620 and yoou are given that r = .12 and you can find the value of n because 2016 minus 2011 = 5.


the formula for f becomes:


f = p * 1.12 ^ 5


the formula for i becomes:


i = f - p which is equal to p * 1.12 ^ 5 - p


this can be factored to get:


i = f - p = p * (1.12 ^ 5 - 1)


since i = 1620, the formula becomes:


1620 = p * (1.12 ^ 5 - 1)


solve for p to get:


p = 1620 / (1.12 ^ 5 - 1) = 2125.031381.


you can verify that this is correct, because:


f = p * 1.12 ^ 5 becomes f = 2125.031381 * 1.12 ^ 5 which becomes f = 3745.031381.


i = f - p becomes 3745.031381 minus 2125.031381 = 1620 which is the interest you were given.


let me know if you have any questions.


theo



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