Question

Define a rational function of money (interest) that
gives the required principal that will give the given
interest after five (5) years at a rate of 0.8%. Attach
the definition of the function with brief explanation.

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Answer 1

Given : interest rate = 0.8 %  , time = 5 Years

To find : Principle  in terns of interest

Solution:

Principle = P

Rate of interest  R = 0.8 %  per annum

Time  n =  5 Years  

Amount after 5 years = A

A = P (1  + R/100)ⁿ

Interest I  = A - P

I  = A - P  

=> I =  P (1  + R/100)ⁿ  - P

=> I = P ( ( 1  + R/100)ⁿ  - 1 )

=> P =  I  / ( ( 1  + R/100)ⁿ  - 1 )

P =  I  / ( ( 1  + 0.8/100)⁵  - 1 )

=> P = I / (1.008⁵ - 1)

=> P = 24.6I

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