Question

What is the future value of $10,000 on deposit for 2 years at 6% simple interest?

a) $13,382.26

b) $11,236

c) $11,200

d) $10,600

Answer 1

The future value of $10,000 at 6% simple interest for 2 years is calculated using the simple interest formula. The interest amounts to $1,200, resulting in a future value of $11,200, which is option c).

Step-by-step explanation:

To calculate the future value of $10,000 deposited for 2 years at 6% simple interest, we use the formula for simple interest:

I = P × r × t

Where:

• I represents the interest
• P represents the principal amount ($10,000)
• r represents the annual interest rate (6% or 0.06)
• t represents the time the money is invested or borrowed for, in years (2 years)

Now, we calculate the interest:

I = $10,000 × 0.06 × 2 = $1,200

The future value (FV) is the sum of the principal and the interest:

FV = P + I

FV = $10,000 + $1,200 = $11,200

Therefore, the future value is $11,200, which corresponds to option c).