Determining the original amount borrowed
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Determining the original amount borrowed

[From: ] [author: ] [Date: 12-03-24] [Hit: ]
06 / 4qtrs = 0.015, and n = 5yrs * 4 qtrs = 20...6000 = Principal(1.......
If an amount was borrowed 5 years ago at 6% compounded quarterly, and $6000 is owed now, what was the original amound borrowed?

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Since:
Future Value = Principal (1+r)^n
you can solve for principal, where the periodic rate "r" = 0.06 / 4qtrs = 0.015, and n = 5yrs * 4 qtrs = 20...

6000 = Principal(1.015^2)
6000 = P (1.34686)
P = $4,454.82

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6000/(1.015)^20
4454.82

1.015 is 100% + 6%/4, compounded 4 times a year, 20 times in 5 years
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