$277.29 = present worth.
INTEREST
If a person borrows money, he usually pays something for the loan.
The sum of money he borrows is called the Principal; the money he pays for the use of the principal is called Interest. Interest is generally reckoned at so much for the use of each $100 for one year. This amount is called the Rate per cent per Annum.
Thus, if we say that $200 is borrowed for three years at 4 per cent per annum, we mean that the borrower, at the end of each year, pays the lender $4 for each $100 borrowed—i.e., $8 interest for each year.
In the above example the interest is supposed to be paid to the lender at the end of each year. Interest thus reckoned is called Simple Interest.
The sum obtained by adding the interest for any given time to the principal is called the Amount in that time.
Common Interest Methods
If we were to find the interest on a sum of money for 3 years 4 months 5 days, we would find the interest for 1 year, then for 1 month (1⁄12 of a year), then for 1 day (1⁄360 of a year). Having the interest for 1 year 1 month 1 day, it is a simple matter of multiplication to get it for 3 years 4 months 5 days.
Example: