To calculate the future value of a deposit using simple interest, we can use the formula:
Future Value (FV) = Principal + Interest
Where:
- Principal: This is the original amount of money deposited, which in this case is $10,000.
- Interest: This is calculated using the formula Interest = Principal × Rate × Time.
In our scenario:
- Principal (P) = $10,000
- Rate (R) = 6% = 0.06
- Time (T) = 2 years
Now, let’s calculate the interest:
Interest = $10,000 × 0.06 × 2 = $1,200
Now we add this interest back to the principal to find the future value:
Future Value = $10,000 + $1,200 = $11,200
Therefore, after 2 years at a 6% simple interest rate, the future value of a $10,000 deposit will be $11,200.