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March 29, 2017

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If the interest rate is 3% and a total of $4,370.91 will be paid to you at the end of 3 year, what is the present value of that sum.

  • business math - ,

    We do not know if it is simple or compound interest. Since compounding frequency is not mentioned, we assume it is simple interest.
    The simple interest formula:
    Future value = present value(1+ni)
    n=number of years,
    i=annual interest
    So
    4,370.91 =PV(1+3*0.03)
    =>
    PV=4,370.91/(1.09)
    =$4010

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