Concept explainers
In Exercises 1–6, find the future value of the investment.
$6,000 for 5 years at 4.75% simple annual interest.
To calculate: The future value of an investment of $6,000 for 5 years at
Answer to Problem 1RE
Solution:
The future value of an investment of $6,000 for 5 years at
Explanation of Solution
Given Information:
Amount of $6,000 is invested for 5 years at
Formula used:
The future value of an investment of PV dollars earning simple interest is given by:
Where r is the annual interest rate and t is the time in years,
Also i is the interest rate per period and n is the number of periods.
Calculation:
Consider the provided information, $6,000 is invested for 5 years at
Since, the present value borrowed is $6,000.
Hence,
Also, since they are borrowed for a period of 5 years,
And since, the interest rate is
Hence, r is given by:
Since, the future value of an investment of PV dollars earning simple interest is given by:
Therefore,
Substitute 6,000 for PV,
Thus, the future value of an investment of $6,000 for 5 years at
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Chapter 2 Solutions
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