Financial institutions, investment types, fees and charges; Simple interest: interest, principal, rate, duration and total return; Compound interest: future/present value, interest earned, compounding frequency and growth graphs
Example 1
Invest $2000 at 5% per year simple interest for 3 years. Find interest earned, in dollars.
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Answer: 300
- I=Prt=2000×0.05×3=300.
Example 2
Invest $6000 at 2% per year compounded annually for 2 years. Find the final balance, in dollars. Round to 2 decimal places.
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Answer: 6242.40
- FV=P(1+r)n=6000(1+0.02)2.
- Rounded result: 6242.40.
Example 3
What principal will grow to $4000 in 3 years at 3% compounded annually? Round to 2 decimal places.
Show worked answer
Answer: 3660.57
- PV=(1+r)nFV=(1+0.03)34000.
- Rounded result: 3660.57.