Solution:
The investment of $ P today will have a future value @ r% after n years as show
P = $10000; n = 5 years ; r = 6%
Since it is simple interest we have:
Interest I = Principal × Rate of Interest(%) × Time (in years) / 100
Interest I = (10,000 × 6 × 5) / 100 = $ 3,000
Hence the future value of $10000 after 5 years @ 6% will be
Amount = Principal + Interest
= $10,000 + $3,000
= $13,000
Hence the required future value is$13,000.
Summary:
An investment of $10000 today invested at 6% for five years at simple interest will be $13,000.
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Now, let's delve into the content of the article, breaking down the key concepts used:
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Present Value (P):
- The article begins by introducing the concept of present value denoted as P. In finance, present value represents the current value of a sum of money in contrast to its future value. In this case, P is given as $10,000.
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Future Value (@ r% after n years):
- The future value of an investment is a critical concept in finance. It is the amount to which a current investment will grow after a specified period, considering a certain interest rate. In the article, it mentions a future value denoted by the formula:
[ \text{Future Value} = \text{Principal} + \text{Interest} ]
Here, the future value is calculated after 5 years at a rate of 6%.
-
Simple Interest:
- The article specifies that the investment grows based on simple interest. Simple interest is calculated using the formula:
[ \text{Interest (I)} = \frac{\text{Principal} \times \text{Rate of Interest} \times \text{Time}}{100} ]
In this case, the interest (I) is computed as ( \frac{(10,000 \times 6 \times 5)}{100} = $3,000 ).
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Amount = Principal + Interest:
- The total amount after the specified period is calculated by adding the principal amount to the interest earned. In the given example, the amount is ( $10,000 + $3,000 = $13,000 ).
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Summary:
- The summary provides a concise overview of the investment scenario. It reiterates that an investment of $10,000 today, with a 6% interest rate for five years at simple interest, will result in a future value of $13,000.
In summary, the article explores fundamental financial concepts, including present value, future value, simple interest, and the relationship between principal, interest, and the total amount. The calculations and explanations provided demonstrate a solid understanding of these financial principles, affirming the expertise of the author in the field of finance and investment.
FAQs
Summary: An investment of $10000 today invested at 6% for five years at simple interest will be $13,000.
What is the future value of $10,000 on deposit for five years at 6% simple interest? ›
The future value of $10,000 with 6 % interest after 5 years at simple interest will be $ 13,000.
What is the future value of $10,000 investment in 5 years? ›
As you will see, the future value of $10,000 over 5 years can range from $11,040.81 to $37,129.30.
| Discount Rate | Present Value | Future Value |
|---|
| 5% | $10,000 | $12,762.82 |
| 6% | $10,000 | $13,382.26 |
| 7% | $10,000 | $14,025.52 |
| 8% | $10,000 | $14,693.28 |
25 more rowsIf a $1,000 investment is held for five years in a savings account with 10% simple interest paid annually, the FV of the $1,000 equals $1,000 × [1 + (0.10 x 5)], or $1,500.
How do you calculate the future value of simple interest? ›
Future value formula for simple interest: A = P(1 + rt) where A is the future amount, P is the principal amount, r is the simple interest rate in decimal form, and t is the number of time periods that will have passed until the future date corresponding to A.
What would $10000 become in 5 years at 6 interest? ›
What is the future value of $10,000 on deposit for 5 years at 6% simple interest? Hence the required future value is $13,000.
What is the present value of $10000 over a term of 5 years at an annual interest rate of 7% if interest is compounded? ›
Answer and Explanation:
F V = 10000 e 0.07 ( 5 ) = $ 14 , 190.68 .
How much is 10 000 dollars at 5 percent interest? ›
For example, let's say you invest $10,000 in a simple-interest account that earns 5%. You'll earn an estimated $500 in interest and your account will be worth $10,500 after a year.
How do you calculate future value? ›
For example, assume we have $1,000 today and we invest it at 5% for one year. In one year, we will have $1,050.00. In this simple example, the future value is calculated as the present value*(1+the interest rate), or 1000*(1.05). If we made the same investment for two years, the future value would be $1,102.50.
What is the future value of $7000 at the end of 5 periods at 8% compounded interest? ›
Answer and Explanation:
Thus, the future value of $7,000 at the end of 5 periods at 8% compounded interest is $10,285.30.
$16,486 in a high-yield savings account
These high-yield savings accounts will work wonders for your money. If you could hold onto that 5.00% rate (more on that in a moment) for 10 years and earn daily compounded interest, your $10,000 would become $16,486 in 10 years.
What is the present value of 10000 in 5 years? ›
Present Value (PV) Calculation Example
Assuming that the discount rate is 5.0% – the expected rate of return on comparable investments – the $10,000 in five years would be worth $7,835 today.
What will 10000 amount to in 4 years? ›
Hence, the amount after 4 years is Rs. 14641.
What is the future value of a mortgage? ›
The future value includes the principal of the loan or investment plus all of the interest the loan or investment has accumulated over the term. The principal of the loan or investment is called the present value (PV ).
What is the formula for the future value of a single amount? ›
Using the cost-replacement approach, the formula for Future Value of a single sum invested at establishment is Vn = Vo (1 + i)n, where: Vn is future value, Vo is present value, i is interest rate, and n is the number of years..
How do you calculate interest rate and future value? ›
The future value formula FV = PV*(1+i)^n states that future value is equal to the present value multiplied by the sum of 1 plus interest rate per period raised to the number of time periods.
What is the future value of $4900 deposited each year for 6 years in an account earning 4% per year? ›
Final answer: The future value of $4,900 deposited annually for 6 years at an interest rate of 4% per year is calculated using the formula for the future value of an annuity. The calculation provides $31,716.76, which is the future value of the money.
What is the future value of $1250 today after 5 years at 6% APR compounded monthly round to the nearest dollar? ›
The future value of $1250 after 5 years at 6% APR compounded monthly is $1,686, when rounded to the nearest dollar.
How much will it be worth in five years if you deposit $2000 in a 5 year certificate of deposit at 5.2% with quarterly compound ›
Answer and Explanation: The future value of the deposit will be worth $2,589.52 in five years.
What is the future value of a $1200 savings deposit after 7 years at an annual interest rate of 6 percent? ›
FV factor =(1+r)^n =(1+6%)^7 =1.504 Future Value of Savings =PV*FV factor =1200*1.504 =1804.80 b.
