Define interest and maturity value with 1 example.
Answers
Answer:
INTEREST DEFINITION:
Interest is defined as the amount of money paid for the use of someone else's money. An example of interest is the Rs.20 that was earned this year on your savings account. An example of interest is the Rs.2000 you paid in interest this year on your home loan.
MATURITY VALUE:
Maturity value is the amount to be received on the due date or on the maturity of instrument/security that investor is holding over its period of time and it is calculated by multiplying the principal amount to the compounding interest which is further calculated by one plus rate of interest to the power which is time period.
Razifah deposited $2000 in an account at rate of 3.75% simple interest. 8 months later, she deposited another $3000 into account. Find the total amount in the account three years after the first deposit.
Answer
After understanding the question, it is better to split the solution into two parts before we can get the answer. These parts are:
1) Find the total amount after 8 months
2) Find the total amount for the rest of the period
Since we are finding the total amount, we can use the maturity value formula shown below:
The maturity value formula is shown below
s=p(1+rt)
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