Question

In: Finance

A $5,000 investment earning 10 percent annual interest will grow in value to $33,637.50 in 20 years.

A $5,000 investment earning 10 percent annual interest will grow in value to $33,637.50 in 20 years.

  • How much of this value is attributable to principle?

  • How much of this value is attributable to simple interest?

  • How much of this value is attributable to compound interest?

Solutions

Expert Solution

Simple Int = Principal *Int Rate * Time

= $ 5000 * 10% * 20

= $ 10000

Total Int = Future Value - Deposit

= $ 33637.50 - $ 5000

= $ 28637.50

Com[pond Int = Total Int - Simple Int

= $ 28637.50 - $ 10000

= $ 18637.50
Part A:

Amount attributed to Principal is $ 5000

Part B:

Amount attributed to simple Int is $ 10000

Part C:

Amount attributed to compound int is $ 18637.50

jeff jeffy answered 2 years ago
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