$100 is deposited in the bank and remains in the account for three years, earning 6% per year with the bank paying simple interest once a year. Using the interest rate formula, the interest rate remains 6% (6% ÷ 1). Year 1 3 Initial investment 2$ 100.00 2$ 100.00 2$ 100.00 Annual interest rate, 6% 0.06 0.06 0.06 Interest $ 6.00 $ 6.00 computed based only on the initial investment Interest earned $ 6.00 Add amount to date $100.00 $106.00 $112.00 = Total cash $106.00 $112.00 $118.00

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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create your own amortization schedule based upon the information

Figure 13.5: Simple Interest
openstax"
$100 is deposited in the bank and remains in the account
for three years, earning 6% per year with the bank
paying simple interest once a year. Using the interest
rate formula, the interest rate remains 6% (6% ÷ 1).
Year
1
2
Initial investment
$
100.00
$
100.00
$
100.00
Annual interest rate, 6%
0.06
0.06
0.06
Interest
$ 6.00
computed
based only on
the initial
investment
Interest earned
$ 6.00
$ 6.00
Add amount to date
$100.00
$106.00
$112.00
= Total cash
$106.00
$112.00
$118.00
Simple Interest. Simple interest earns money only on the principal. Modified for PPT. (attribution:
Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Transcribed Image Text:Figure 13.5: Simple Interest openstax" $100 is deposited in the bank and remains in the account for three years, earning 6% per year with the bank paying simple interest once a year. Using the interest rate formula, the interest rate remains 6% (6% ÷ 1). Year 1 2 Initial investment $ 100.00 $ 100.00 $ 100.00 Annual interest rate, 6% 0.06 0.06 0.06 Interest $ 6.00 computed based only on the initial investment Interest earned $ 6.00 $ 6.00 Add amount to date $100.00 $106.00 $112.00 = Total cash $106.00 $112.00 $118.00 Simple Interest. Simple interest earns money only on the principal. Modified for PPT. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
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