consider a 1300 deposit earning 7 present interest per year for six years what i

Question

consider a 1300 deposit earning 7 present interest per year for six years what is the future value how much total interest is earned and how much is interest earned on interest consider a 1300 deposit earning 7 present interest per year for six years what is the future value how much total interest is earned and how much is interest earned on interest consider a 1300 deposit earning 7 present interest per year for six years what is the future value how much total interest is earned and how much is interest earned on interest

Explanation / Answer

Future value is calculated by compounding the Present cash flow

The formula is,                                

FV = Present value *(1 + r)^n                                                   

= 1300*(1 + 0.07)^6       

= 1300*(1.07)^6                                                               

= 1300*(1.500730351849)

= 1950.9494574037        

So FV value of 1300 received after 6 years is 1950.95

Total interest earned = 1950.95 – 1300 = 550.95

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