Simple Interest
The final value of an investment done at simple interest is:
FV = P (1 + r.t)
Where P is the initial investment (or principal), r is the interest rate, and t is the time.
The money market fund offers a simple interest rate of r = 9%. If someone invests P = $18,000 for a period of t = 6 months, we can find the final value by substituting these values in the formula.
But we first need to express the interest rate in decimal:
r = 9% = 9 / 100 = 0.09
The time is in months. Converting to years:
t = 6 / 12 = 0.5 years.
Now we can use the formula:
FV = $18,000 (1 + 0.09 * 0.5)
Calculating:
FV = $18,000 (1 + 0.0045)
FV = $18,000 (1 .0045)
FV = $18,810
The total amount received is $18,810