Find the future value of each deposit if the account pays (a) simple interest, and (b) interest compounded annually.
$500 at 3% for 6 years
(a) If the account pays simple interest, the future value of each deposit can be calculated using the formula:
FV = P (1 + r * t)
Where:
FV = Future Value
P = Principal amount (initial deposit)
r = Interest rate
t = Number of years
In this case, P = $500, r = 3% = 0.03, and t = 6.
FV = $500 * (1 + 0.03 * 6)
= $500 * (1 + 0.18)
= $500 * 1.18
= $590
Therefore, the future value of each deposit if the account pays simple interest would be $590.
(b) If the interest is compounded annually, the future value can be calculated using the formula:
FV = P (1 + r)^n
Where:
FV = Future Value
P = Principal amount (initial deposit)
r = Interest rate
n = Number of compounding periods
In this case, P = $500, r = 3% = 0.03, and n = 6.
FV = $500 * (1 + 0.03)^6
= $500 * (1.03)^6
= $500 * 1.191016
= $595.51
Therefore, the future value of each deposit if the account pays interest compounded annually would be approximately $595.51.
To calculate the future value of each deposit, we can use the following formulas:
(a) Simple Interest:
Future Value = Principal + (Principal x Interest Rate x Time)
(b) Compound Interest:
Future Value = Principal x (1 + Interest Rate)^Time
Let's calculate the future value of the deposit using both simple and compound interest:
(a) Simple Interest:
Principal = $500
Interest Rate = 3% = 0.03
Time = 6 years
Future Value = 500 + (500 x 0.03 x 6)
Future Value = 500 + (500 x 0.18)
Future Value = 500 + 90
Future Value = $590
(b) Compound Interest:
Principal = $500
Interest Rate = 3% = 0.03
Time = 6 years
Future Value = 500 x (1 + 0.03)^6
Future Value = 500 x 1.03^6
Future Value ≈ 500 x 1.191
Future Value ≈ $595.50
Therefore, the future value of the $500 deposit after 6 years will be:
(a) Simple Interest: $590
(b) Compound Interest: $595.50
To calculate the future value of a deposit with simple interest, you can use the formula:
Future Value = Principal + (Principal * Interest Rate * Time)
(a) Simple Interest:
In this case, the principal (P) is $500, the interest rate (R) is 3%, and the time (T) is 6 years.
a. Future Value with Simple Interest:
Future Value = $500 + ($500 * 0.03 * 6)
Future Value = $500 + ($500 * 0.18)
Future Value = $500 + $90
Future Value = $590
Therefore, if the account pays simple interest, the future value of the deposit would be $590.
(b) Interest Compounded Annually:
To calculate the future value with interest compounded annually, you can use the formula:
Future Value = Principal * (1 + Interest Rate)^Time
In this case, the principal (P) is $500, the interest rate (R) is 3%, and the time (T) is 6 years.
b. Future Value with Interest Compounded Annually:
Future Value = $500 * (1 + 0.03)^6
Future Value = $500 * (1.03)^6
Future Value = $500 * 1.191016
Future Value = $595.51 (rounded to two decimal places)
Therefore, if the account pays interest compounded annually, the future value of the deposit would be approximately $595.51.