formula is F=P+(I+rt), means F=principal + (interest+rate*time).
formula is F=P+(I+rt), means F=principal + (interest+rate*time).
Simple interest, which is the interest computed on the original principal only, is defined by the following formula: I = Prt ,
where P is the principal (or present value), r is the interest rate, and t is the time (in year)
The future value (or accumulated amount), which is the sum of the principal and interest after t years, is given by the following formula:
F = P + I
Substituting 'Prt' for 'I' in the above formula, we arrive at the following:
F = P + Prt
Factoring out 'P' from both terms on the right hand side of the equation, we get:
F = P(1 + rt)
Since we are looking to solve for the present value (P), we first solve the equation above for P by dividing both sides of the equation by '1 + rt':
F/(1 + rt) = P(1 + rt)/(1 + rt)
F/(1 + rt) = P
I'm assuming the future value is $7,896 ==> F = 7896
At a rate of 7.5% ==> 7.5%/100% = 0.075
For 4 months ==> 4 months/12 months per year = 0.333
Plug in these values into the equation solved for P to solve for the present value:
P = F/(1 + rt)
= 7896/(1 + 0.075ยท0.333)
= 7896/(1 + 0.025)
= 7896/1.025
= 7703.41
Thus, the principal (or present value) is $7,703.41