Mathematics of Finance Guidelines

The simple interest per year is: $5,000 × .08 = $400. So after 10 years you will have: $400 × 10 = $4,000 in interest. The total balance will be $5,000 + 4,000 = $9,000. With compound interest we use the future value formula: FV = PV(1 +r)t . FV = $5,000(1.08)10 = $10,794.62. The difference is: $10,794.62 – 9,000 = $1,794.62. 2. ................
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