Solve the maturity value of 500,00 with 9%interest rate using simple and compound interest after 5 years use the table that we use in computing simple and compound interest
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Solve the maturity value of 500,00 with 9%interest rate using simple and compound interest after 5 years use the table that we use in computing simple and compound interest
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Answer:
To calculate the maturity value of an investment using simple interest, we can use the formula:
Maturity Value = Principal + (Principal * Interest Rate * Time)
Given:
Principal (P) = 500,000
Interest Rate (R) = 9% (0.09)
Time (T) = 5 years
Using the formula, we can calculate the maturity value for simple interest:
Maturity Value = 500,000 + (500,000 * 0.09 * 5)
Maturity Value = 500,000 + 225,000
Maturity Value = 725,000
Therefore, the maturity value of 500,000 with a 9% interest rate using simple interest after 5 years is 725,000.
For compound interest, we need to use the compound interest formula:
Maturity Value = Principal * (1 + Interest Rate)^Time
Using the same values:
Maturity Value = 500,000 * (1 + 0.09)^5
Maturity Value = 500,000 * (1.09)^5
Maturity Value = 500,000 * 1.538624
Maturity Value = 769,312
Therefore, the maturity value of 500,000 with a 9% interest rate using compound interest after 5 years is 769,312.
Please note that the table you mentioned is not necessary for these calculations as we can directly use the formulas.
Answer:
The maturity value after 5 years with a 9% interest rate is:
- Simple interest: 725,000
- Compound interest: 769,312
Step-by-step explanation:
When looking at investment growth, understanding simple versus compound interest is essential. Simple interest calculates interest on the initial amount, while compound interest includes interest on both the initial amount and any accrued interest.
For instance, with an initial investment of 500,000 over 5 years at a 9% interest rate:
- Simple interest yields a maturity value of 725,000.
- Compound interest results in a maturity value of 769,312.
The key difference lies in how interest is calculated: simple interest relies solely on the initial amount, while compound interest includes accrued interest in subsequent calculations, leading to a higher final amount.