Question

Find the principal P that corresponds to the future value F= $1,300 under r = 4% interest compounded daily for t = 3 years. Round your final answer to two decimal places.

Answer 1

The formula to find the principal is:

$FV=P(1+i)^n$

Where

FV is future value

P is principal

i is the rate of interest

n is the time frame

Given,

FV = 1300

i = r = 4%, or 4/100 = 0.04

n = t = 3

Plugging into formula and solving gives us:

$\begin{gathered} FV=P(1+i)^n \\ 1300=P(1+0.04)^3 \\ 1300=P(1.04)^3 \\ P=\frac{1300}{1.04^3} \\ P=1155.695 \end{gathered}$

Rounding to 2 decimal places:

$1155.70