Sam Boilermaker borrows $4000 from his parents for his
final year of college. he agreed to repay it at 7% interest in one
payment 3 years later. how much does he repay. how much is
principal?
ANSWER:
N = 3 years
i = 7%
Present value = $4,000
Future value = ?
Future value = Present value(f/p,i,n)
Future value = 4,000(f/p,7%,3)
Future value = 4,000 * 1.225
Future value = 4,900
Principal is the present value that is $4,000.
Interest = Future value - Principal = $4,900 - $4,000 = $900
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