**SI = P0(i)(n) = $1,000(0.07)(2) = $140** **Assume that you deposit $1,000 in an account earning 7% simple interest for 2 years. ***What is the accumulated interest at the end of the 2nd year?* **Simple Interest (FV)** **What is the Future Value (FV) of the deposit?** **Simple Interest (PV)** ** ***The Present Value is simply the $1,000 you originally deposited. That is the value today!* **Present Value**** is the current value of a future amount of money, or a series of payments, evaluated at a given interest rate.** **What is the Present Value (PV) of the previous problem?** **Why Compound Interest?** **Future Value (U.S. Dollars)** **Future Value Single Deposit (Graphic)** ** Assume that you deposit $1,000 at a compound interest rate of 7% for 2 years.** **Future Value Single Deposit (Formula)** **FV1 = P0 (1 + i)1 = $1,000 (1.07) = $1,070** **Compound Interest** ** You earned $70 interest on your $1,000 deposit over the first year.** ** This is the same amount of interest you would earn under simple interest.**
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