Maturity Value Practice

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Question 2

Calculate the maturity value of a $5000 loan with the simple interest of 10% per year. The duration of the loan is 3 years.


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Select and check your answer...

A. $3500
B. $5000
C. $6500
D. $8000

Step by Step Solution

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    Step 1

    We can start with the maturity value formula:

    maturity value formula


    • P is the principal ($5000)
    • r is the interest rate per year (10%)
    • t is the loan duration in years (3 years).
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    Step 2

    With P=5000, r=10% and t=3, we can substitute these values into the formula as shown (Note that, 10% is the same as 10/100 ):

    using the maturity value formula
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    Step 3

    The calculated maturity value is $6500. Hence, the answer is C.