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QUESTION: Hello:

I have attached an image with this question for you to see. I hope that you can see the interest table attachment.

At the bottom of the table, there is an example of $500.00 at 4% for 5 years (periods). The calculation as shown is 500.00 X $1.216653.

How did the dollar sign cancel from the amount of $500.00?

Is it actually $500.00/$1.00 X $1.216653 or something else?

I thank you for your reply.

ANSWER: It should actually be written as, "$500.00 X 1.216653" since the 500 is the dollars and

the 1.216653 is the interest rate.

---------- FOLLOW-UP ----------

QUESTION: Thanks for the reply!

No, I disagree. $1.216653 is the dollar amount $1.00 at 4% for 5 years earns. So the calculation is something like:

$500.00/$1.00 X $1.216653 in which one of the dollar signs cancels

or

$500.00 X $1.216653/$1.00, in which one of the dollar signs cancels.

The number 1.216653 is the interest multiplier, not a dollar value.

If you're considering this as the dollar amount to be used on $1,

then putting $1.216653/$1.00 is OK, but the number 1.216653 is usually taken as just the multiplier.

What you have done most people just assume without even thinking about it.

Either way, the same result is gotten, and that is $608.33.

In other words $500 with $108.33 in interest added on.

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