In order to determine the principal amount, remember that $1,687.30 is the principal amount plus all interest accumulated over 3 years.
:
To find the effect of 4% annual interest over 3 years, take 1.04 and raise it to the third power:
1.04³ = 1.125
Divide the final amount, 1687.30 by 1.125 to find the principal amount:
1687.30 ÷ 1.125 = ~1500
Answer is A.
