Question

find the future value by the end of 3 years if you borrow $5000 And pay 10% of the interest per year using simple interest calculation.

Answer 1

Future Value is the value that an amount today will be worth at a certain point in the future. Simple Interest is the interest earned only on the original amount invested.

Future Value Using Simple Interest

FV = PV (1 + rt)

FV = Future Value

PV = Present Value

r = Rate of Interest

t = Number of years

Plugging Values in above formula

FV = 5000 * (1 + 10 / 100 * 3)

= 5000 * [1 + (0.1 * 3)]

= 5000 * [1 + 0.3]

= 5000 * 1.3

= $6500

So, Future Value at the end of 3 years is $6500