Math CentralQuandaries & Queries


Question from Michelle, a parent:

Present Value of $1500 to be paid in Year 7, with an interest rate of 12%

Hi Michelle.

You don't provide much information to go on, so I will assume some things:

  • You want the total amount at that time including principal and interest.
  • Interest is compounded annually at 12%.
  • Year 7 means 7 years later.

The formula for annually-compounded interest is:

T = P(1 + i)n


  • T = the total value at the end of the time period,
  • P = the principal value at the beginning of the time period,
  • i = the annual interest rate, expressed as a decimal (12% = 0.12) and
  • n = the number of years.

In your case, P = $1500, i = 0.12 and n = 7. Plug the numbers into your calculator to finish the problem.


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