Future Value Simple Interest Formula

Before we learn the future value simple interest formula, let's understand what it means. The final amount of money lent or the total amount at the end of the period is known as future value at the end of that period. The future value simple interest formula gives us the future value that simple interest will produce after the end of the period. Let us learn more about the future value simple interest formula along with the solved examples.

What Is the Future Value Simple Interest Formula?

The future value simple interest formula is the addition of the principal amount that we have in the beginning and the interest earned on that principal amount after the completion of the period. The Future Value Simple Interest Formula is given as, 

F V = P + I or F V = P(1 + rt)

Here,

• P is the principal amount,
• I is the interest,
• r is the rate, and
• t is the time.

Examples Using Future Value Simple Interest Formula

Example1: If Sam lends $1,500 to his friend at an interest rate of 4.3%. Find the future value after 6 years by using future value simple interest formula?

Solution:  To find: The future value after 6 years.

P = 1500, r = 0.043 (4.3%), and t = 6 (given)

Using  Future Value Simple Interest Formula,

F V = P + I or F V = P(1 + rt)

Put the values,
F V = 1500 + I or F V = 1500(1 + 0.043 × 6)

F V = 1500(1 + 0.258)

F V = 1500(1.258)

F V = 1500(1.258)

F V = 1887

Answer: The future value after 6 years will be $1887.

Example 2: James borrowed $600 from the bank at some rate and that future value becomes quadruple in 4 years. Calculate the rate at which James borrowed the money by using future value simple interest formula.

Solution: To find: Interest rate

P = 600, FV = 2400, and t = 4(given)

Using formula,

F V = P + I or F V = P(1 + rt)

2400 = 600 + I or F V = 600(1 + r × 4)

2400 = 600 + 2400r

1800 = 2400r

r = 1800/2400

r = 0.75%

Answer: The Interest rate on the given amount of money is 75%.