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# Calculate Simple Interest, Future Value and Present Value

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https://brainmass.com/math/basic-algebra/simple-compound-interest-future-present-values-loans-596035

#### Solution Preview

To calculate Simple Interest we need to use the following formula:

Simple Interest I = Principal x Rate x Time

Interest is the total amount of interest paid.
Principal is the amount borrowed,
Rate is the percentage of principal amount charged as interest each year.
Time is the time involved.

7. Find the simple interest I of the given loan amount.
\$4000 borrowed at 6% for 3 years.

Principal P = \$4000
Rate r = 6% = 6/100 = 0.06
Time t = 3

To find the simple interest, we multiply 4000 x 0.06 x 3 to get that:

I = \$720.00

8. Find the simple interest I of the given loan amount.
\$490 borrowed at 6 3/4% for 271 days.

Principal P = \$490
Rate r = 6 3/4% = 6.75% = 0.0675
Time t = 271 days ÷ 365 days/year = 0.74 years

To find the simple interest, we multiply 490 x 0.0675 x 0.74 to get that:

I = \$24.48

9. Find the simple interest I of the given loan amount.
\$5,669 borrowed at 11 3/4% from July 1 to December 31 of the same year.

Principal P = \$5669
Rate r = 11 3/4% = 11.75% = 0.1175
Time t = 6 months ÷ 12 months/year = 0.5 years

To find the simple interest, we multiply 5669 x 0.1175 x 0.5 to get that:

I = \$333.05

To calculate the Future Value we need to use the following formulas -
Future Value (FV) A = Principal(1 + Rate)^Time
A = P(1 + r)^t

Future Value, A is Total Accrued Amount (principal + interest)
Principal is the amount borrowed,
Rate is ...

#### Solution Summary

The attached solution contains multiple problems related to Simple Interest and Compound Interest. There are examples on how to calculate the Present Value based on Future value of loan and similar examples on how to calculate Future Value.

\$2.19

## Calculating present value and future value

Find the future value one year from now of a \$7,000 investment at a 3 percent annual compound interest rate. Also calculate the future value if the investment is made for two years.

FV one year
FV two years
Sum of FV's

Find the future value of \$10,000 invested now after five years if the annual interest rate is 8 percent.

a. What would be the future value if the interest rate is a simple interest rate?

FV using simple interest

b. What would be the future value if the interest rate is a compound interest rate?

FV using compound interest

Find the present value of \$7,000 to be received one year from now assuming a 3 percent annual discount interest rate. Also calculate the present value if the \$7,000 is received after two years.

PV received one year from now
PV received two years from now

Determine the present value now of an investment of \$3,000 made one year from now and an additional \$3,000 made two years from now if the annual discount rate is 4 percent.

PV one year from now
PV two years from now

Use a financial calculator or computer software program to answer the following questions.

a. What is the present value of \$359,000 that is to be received at the end of twenty-three years, the discount rate is 11 percent, and semiannual discounting occurs?

PV w/ semi-annual discounting

b. How would your answer for (a) change if monthly discounting were used?

PV w/ monthly discounting

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