Question

find the future value of each deposit if the account pays (a) simple interest (b) interest compounded annually round to the nearest cent as needed

Answer 1

Answer:

Given that;

The account has $900 at 6% for 3 years.

a) For simple interest

The future value will be;

$\begin{gathered} F=P+I \\ F=P+\text{Prt} \\ F=P(1+rt) \\ P=\text{ \ 900} \\ r=0.06 \\ t=3 \\ F=\text{ \ 900(1+0.06(3))} \\ F=\text{ \ 900(1+0.18)} \\ F=\text{ \ 900(1.18)} \\ F=\text{ \ 1,062} \end{gathered}$

Therefore, the future value is;

$\text{ \ 1,062}$

b) For compound interest.

The future value will be;

$\begin{gathered} F=P(1+\frac{r}{n})^{nt} \\ P=\text{ \ 900} \\ r=0.06 \\ n=1 \\ t=3 \\ F=\text{ \ 900(1+}\frac{0.06}{1})^{1(3)} \\ F=900(1.06)^3 \\ F=\text{ \ 1,071.91} \end{gathered}$

Therefore, the future value will be;

$F=\text{ \ 1,071.91}$