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find interest question

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2 Answers

A = P (1 + r/n)^(nt)
 
Since we're asked to find the "present value", the $3000 must be the "future value" in 5 years. I.e., A = $3000, P = "present value", r = 0.06, n = 4, t = 5.
 
Substitute into the formula:
3000 = P (1 + 0.06/4)^(4*5)
 
Solve for P:
P = (3000)/((1.015)^20) ≈ $2,227.41
 
Calculators may behave differently, but here are the keystrokes on the Mac OS X calculator in Scientific mode:
3000 [÷] 1.015 [y^x] 20 [=]

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