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

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+(r)/(n))^(nt) \\ P=\text{ \$900} \\ r=0.06 \\ n=1 \\ t=3 \\ F=\text{ \$900(1+}(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}`