If Mr. John Chrystal invests $6,000 today (Present Value) at a compound interest of 9 percent, calculate the Future Value of the investment after 30 years using the compound interest formula. In addition, calculate the Future Value of the investment 30 years from now using a 9 percent simple interest rate. State the difference between the two Future Values (using compound and simple interest).
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Future value = Accumulated value
Compound accumulation
Formula :
A(n) = P(1 + i)ⁿ
A = Future value
P = deposited amount
n = time in years
i = rate of interest.
Doing the substitution :
6000(1.09)³⁰ = 79606.07
2) Simple interest accumulation
Interest = P × i × n
= 6000 × 0.09 × 30 = 16200
Accumulated amount = 6000 + 16200 = 22200
The difference :
79606.07 - 22200 = 57406.07
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