Ch6.3 - Maturity Value

FinanceSimple Interest
1.0x

Ch6.3 - Maturity Value

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  1. Simple Interest – Lesson 3Maturity Value

    Slide 1 - Simple Interest – Lesson 3Maturity Value

    • Rob Sorensen
    • © Copyright 2015. All rights reserved.
  2. Maturity Value

    Slide 2 - Maturity Value

    • When a loan or investment reaches the end of its term, we say that it matures.
    • The maturity value (also called the future value) is the total of both the original principal plus the interest due on the maturity date.
    • We’ll use the letter S for maturity.
    • Rob Sorensen
    • 2
  3. Maturity Value Formula

    Slide 3 - Maturity Value Formula

    • The basic formula for the maturity value is:
    • We know that I=Prt, so we can re-write the formula as:
    • We can then re-arrange terms as follows:
    • Rob Sorensen
    • 3
  4. Example – Maturity

    Slide 4 - Example – Maturity

    • Find the future value (maturity) of a $500 investment earning 4%p.a. for 146 days.
    • Rob Sorensen
    • 4
  5. Rob Sorensen

    Slide 5 - Rob Sorensen

    • 5
    • Try It Out!
    • What will be the maturity value of $2,500 invested at 4.25% p.a. from June 3, 2016 to August 16, 2016?
  6. Success Strategies

    Slide 6 - Success Strategies

    • Take your time reading questions.
    • Write down everything that is given to you in the question as well as the unknown that you are trying to find.
    • Make sure that you are working in consistent units – i.e. if the rate is annual, you must convert your time to years.
    • Use all decimals during calculations – only round your final answer.
    • Learn how to use the DATE functions on your calculator.
    • Rob Sorensen
    • 6