Maturity Value Practice
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.
Answer
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Step by Step Solution
Step 1
We can start with the maturity value formula:
Where:
Where:
- P is the principal ($5000)
- r is the interest rate per year (10%)
- t is the loan duration in years (3 years).
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 ):
Step 3
The calculated maturity value is $6500. Hence, the answer is C.
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