Question

Findthefuturevalueofeachdepositiftheaccountpaysthefollowingfor$500at4%for9years.a)asimpleinterest b)interestcompoundedannually

Answer 1

a)

To find the value of the ammount we are going to have after 9 years of simple interest we use the formula:

`A=P(1+rt)`

where P is the principal, r is the interest rate in decimal form and t is the time we leave the money.

Then:

`A=500(1+0.04\cdot9)=680`

Therefore, after 9 years of simple interest we will have $680.00.

b)

To find the ammount we will have after 9 years of compound interest we use the formula:

`A=P(1+(r)/(n))^(nt)`

where P is the principal, r is the interest in decimal form, n is the number of times the interest is compounded in a given time t.

Then:

`A=500(1+(0.04)/(1))^(1\cdot9)=711.66`

Therefore, after 9 years of compounded interest we will have $711.66.