Question

Find the future value of $100 in five years at 5% interest.

Answer 1

The future value of $100 after five years at a 5% simple interest rate is $125, calculated by multiplying the annual simple interest of $5 by 5 years and adding it to the principal amount.

Step-by-step explanation:

The future value of $100 after five years at a 5% simple interest rate is $125. Here's how to calculate it:

1. Firstly, determine the annual interest: $100 × 0.05 = $5 per year.
2. Then, multiply the annual interest by the number of years: $5 × 5 years = $25.
3. Add this total interest to the original principal to find the future value: $100 + $25 = $125.

Thus, using a simple interest formula where interest is calculated only on the initial amount, or principal, the total future amount will be $125 in five years.