With an interest rate of 6 percent, the present value of $100 next year is approximately?

Solution:

Simple interest is the amount of interest paid or computed on the original principal only of a loan or on the amount.

The amount is the total sum paid back including the principal and interest after a certain period of time.

We know that,

SI = (P × R × T) / 100

where, SI = simple interest, P = Principal , T = Time in years, R = Rate per annum

P = $100 (given)

T = 1 year (given)

R = 6% (given)

By substituting the values,

SI = (100 × 6 × 1)/100

= 6

Thus, the interest amount is $6

We know that,

A = P + SI

where, A = Amount

Thus, amount after one year will be,

A = 100 + 6

= 106

Hence, with an interest rate of 6 percent, the present value of $100 next year is approximately equal to $106

With an interest rate of 6 percent, the present value of $100 next year is approximately?

Summary:

With an interest rate of 6 percent, the present value of $100 next year is approximately equal to $106