Example 3: Suppose you borrow

$500

from your friend for 9 months and you agree to an annual interest rate of

12%

, what is the future value of the loan at the end of 9 months?\ Example 4: If you want to have

$1000

in 6 months, how much would you have to invest at a

8%

rate now to have

$1000

in 6 months?\ Compound interest is where interest for each period is added to the principal before the interest is calculated for the next period.

Example 3: Suppose you borrow $500 from your friend for 9 months and you agree to an annual interest rate of 12%, what is the future value of the loan at the end of 9 months? Example 4: If you want to have $1000 in 6 months, how much would you have to invest at a 8% rate now to have $1000 in 6 months? Compound interest is where interest for each period is added to the principal before the interest is calculated for the next period