Question

The future value of a lump sum of $500 invested today at a constant annual interest rate of 2.5% would be worth how much in 8 years?

Answer 1

500* .025=12.05 take that times it by 8 12.50*8=100
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Answer 2

Okay. With the constant interest rate being 2.5%, this means that it is simple interest. To find the amount of simple interest during a period of time, you do R = prt. The principle is the initial amount in the bank, in this case, 500. The annual interest rate is 2.5% and the amount of time is 8 years. Multiply all of those numbers or find the amount of interest that will be in the bank. 500 * 2.5% (0.025) is 12.5. 12.5 * 8 is 100. There will be $100 in interest in 8 years. Now, add that to 500 to find the total. 500 + 100 = 600. The future value of a lump sum will be worth $600 in 8 years.