#### Explanation:

Final Value $.3500 Number of Years $n = 8$Rate of Interest r=5% = 0.05 Principal amount $= p$Interest amount $= I$Final amount $p + I$The formula to calculate Interest is $= p \times n \times r$$p \times n \times r = I$Add p to both sides. You get the final amount. Both sides are equal $p + \left[p \times n \times r\right] = I + p$In our problem I + p =$3,500

Now substitute all the known values in the equation.

$p + \left[p \times 8 \times 0.05\right] = 3500$
$p + 0.4 p = 3500$
$1.4 p = 3500$
$p = \frac{3500}{1.4} = 2500$

Principal amount =\$.2,500