Kevin deposits $100 into a savings account today. this is his (future value, simple interest, compound interest, present value) in one year, kevin’s money earns 5 percent. the $5 he earns is (future value, simple interest, compound interest, present value). in one year’s time, kevin’s money is worth $105. this is his (future value, simple interest, compound interest, present value). the interest kevin earns in the first year will also earn interest in subsequent years. this is called (future value, simple interest, compound interest, present value).

Present Value,  Simple Interest, Future Value & Compound Interest

Explanation:

Present Value is the amount invested now, so $100 deposited by Kevin into a savings account today is present value.

Simple Interest is the interest earned on the amount invested . So, 5% of $100 = $5 is simple interest.

Future Value = Present Value + Interest . Kevin's money is worth $105 after a year = $100 + $5 . So, $105 is future value.

Interest earned on Interest is called Compound Interest. The interest Kevin earns in the first year will also earn interest in subsequent years . This is called compound interest.

Hope it helps.

Thank you !!

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