You financed a car at a 7% annual interest rate. At the end of five years, you paid a total of 37,869.90. What was the purchase price of the car? Round to the nearest penny.The purchase price of the car was

Solution

Y o u f inan ce d a c a r a t a 7% ann u a l in t eres t r a t e . A t t h e e n d o f f i v e ye a rs, yo u p ai d a t o t a l o f 37, 869.90. Wha t w a s t h e p u rc ha se p r i ce o f t h e c a r ? R o u n d t o t h e n e a res t p e nn y . T h e p u rc ha se p r i ce o f t h e c a r w a s

Principal : 28051.78

Solution steps

Translate the problem into an equation:

37869.9 = P (1 + 0.07 \cdot 5)

Solve for

P, 37869.9 = P (1 + 0.07 \cdot 5) : P = 28051.78

Principal : 28051.78