Question

And investment of $2700 is made for eight months I have an annual simple interest rate of 2.25% what is the future value of the investment

Answer 1

ANSWER

The future value of the investment is $2704.3515

STEP-BY-STEP EXPLANATION:

Given information

The present value = $2700

Annual simple interest rate = 2.25%

number of compounded period = 8 months

Let the future value be F.V

To find the future value, we need to apply the below formula

$F\mathrm{}V\text{ = }P.V(1+r)^n$

Where

• FV = future value

,

• PV = Present value

,

• r = interest rate

,

• n = compounding period

The next thing is to convert 8 months to a year

let x be the number of years

Recall that,

12 months is equivalent to 1 year

8 months is equivalent to x years

Mathematically,

$\begin{gathered} 12\text{ = 1} \\ 8\text{ = x} \\ \text{Cross multiply} \\ 12\cdot\text{ x = 8} \\ 12x\text{ = 8} \\ \text{Divide both sides 12} \\ \frac{12x}{12}\text{ = }\frac{8}{12} \\ x\text{ = 06667 year} \end{gathered}$

Using the above formula, we can now find the future value of the investment

$\begin{gathered} F\mathrm{}V=P.V(1+r)^n \\ F\mathrm{}V\text{ = 2700( 1 + }\frac{2.25}{100})^{0.667} \\ F\mathrm{}V=2700(1+0.0225)^{0.667} \\ F\mathrm{}V=2700(1.0225)^{0.067} \\ F\mathrm{}V\text{ = }2700\text{ x 1.014}945 \\ F\mathrm{}V\text{ = \ 2704.3515} \end{gathered}$