Question
Which would you accept: RM100 now or RM109 in two years’ time if the money worth 6% per annum simple interest?
Answers
GPT 3.5
To determine which option would be more beneficial, we can calculate the future value of RM100 after two years at a 6% per annum simple interest rate.
The future value (FV) of an amount using simple interest is calculated using the formula:
FV = P(1 + r * n)
where:
FV = Future value
P = Principal amount
r = Rate of interest per period
n = Number of periods
In this case, P = RM100, r = 6% = 0.06 (as a decimal), and n = 2 years.
FV = 100(1 + 0.06*2)
FV = 100(1 + 0.12)
FV = 100(1.12)
FV = 112
Therefore, RM100 will grow to RM112 after two years at a 6% per annum simple interest rate.
Comparing this with the second option of receiving RM109 in two years, it is evident that choosing RM109 would be more beneficial than RM100, as it is a larger amount.
The future value (FV) of an amount using simple interest is calculated using the formula:
FV = P(1 + r * n)
where:
FV = Future value
P = Principal amount
r = Rate of interest per period
n = Number of periods
In this case, P = RM100, r = 6% = 0.06 (as a decimal), and n = 2 years.
FV = 100(1 + 0.06*2)
FV = 100(1 + 0.12)
FV = 100(1.12)
FV = 112
Therefore, RM100 will grow to RM112 after two years at a 6% per annum simple interest rate.
Comparing this with the second option of receiving RM109 in two years, it is evident that choosing RM109 would be more beneficial than RM100, as it is a larger amount.