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Discounting and investment appraisal

Question 1

Simple interest

An amount of $600 is invested for 2 years earning simple interest at a rate of
5% per year. What is the final sum on the account at the end of two years?

$600 × 5% × 2 = $60 interest earned

Total balance = $600 + $60 = $660

Question 2

Simple interest formula

An amount of $1,500 is invested for 3 years into an account earning simple
interest at a rate of 0.2% per month. What is the final sum on the account at the
end of two years?

V = P(1 + r × n)

P = $1,500, r = 0.002, n = 36

V = $1,500 (1 + 0.002 × 36) = $1,608

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