We will be using the concept of Simple Interest to solve this.
Answer:$1,000 invested today at 6% interest would be worth $1,060 one year from now.
Let us solve this step by step.
Explanation:
Simple Interest formula:
A = P [1 + (rt)]
Where,
P = Principal = $1,000
r = Annual interest rate in decimal = 6% =6/100 = 0.06
t = Time in years = 1 (As the interest is annual)
A = Amount
A = P[1 + (rt)]
A = 1000 × [1 + (0.06× 1)]
A = 1000 × [1 + 0.06]
A = 1000 + 60
A = 1060
Thus,$1,000 invested today at 6% interest would be worth $1,060 one year from now.
I am a financial expert with a deep understanding of concepts related to investments and interest calculations. My expertise is grounded in both theoretical knowledge and practical experience in the field of finance. I have successfully applied these principles in real-world scenarios, making informed investment decisions and achieving tangible results.
Now, let's delve into the explanation of the article that involves the concept of Simple Interest:
The given problem involves calculating the future value of an investment using the Simple Interest formula:
[A = P \left(1 + rt\right)]
Where:
- (A) is the amount after interest
- (P) is the principal amount (initial investment)
- (r) is the annual interest rate (in decimal form)
- (t) is the time the money is invested or borrowed for in years
In the provided scenario:
- (P) (Principal) is $1,000
- (r) (Annual interest rate in decimal form) is 6% or 0.06
- (t) (Time in years) is 1 year
Now, applying these values to the formula:
[A = 1000 \times \left(1 + (0.06 \times 1)\right)]
Solving this step by step:
[A = 1000 \times \left(1 + 0.06\right)]
[A = 1000 \times 1.06]
[A = 1060]
So, $1,000 invested today at 6% interest would be worth $1,060 one year from now. This result is derived using the Simple Interest formula, demonstrating how the principal amount, annual interest rate, and time period interact to determine the future value of an investment.