If the principal P = $900, the rate r = 5 1/2 %, and time t = 1 year, find the following.
What is the amount of interest?
What is the future value?
900 *.055 = 49.50
900 * 1.055 = 949.50
To calculate the amount of interest and the future value, we can use the formula for simple interest:
Interest (I) = Principal (P) * Rate (r) * Time (t)
Future value (FV) = Principal (P) + Interest (I)
Given:
Principal (P) = $900
Rate (r) = 5 1/2 % = 5.5% (percentage converted to decimal: 0.055)
Time (t) = 1 year
1. Calculate the interest:
Interest (I) = $900 * 0.055 * 1
I = $49.50
The amount of interest is $49.50.
2. Calculate the future value:
Future value (FV) = $900 + $49.50
FV = $949.50
The future value is $949.50.