1. You are scheduled to receive $7,500 in two years. When you receive it, you will invest it at...
Question:
1. You are scheduled to receive $7,500 in two years. When you receive it, you will invest it at 4.5 percent per year. How much will your investment be worth ten years from now?
| $10,665.75 |
| $11,428.09 |
| $9,110.24 |
| $10,113.33 |
| $11,617.07 |
2. Western Bank pays 5 percent simple interest on its savings account balances, whereas Eastern Bank pays 5 percent compounded annually. If you deposited $6,000in each bank, how much more money would you earn from the Eastern Bank account at the end of 3 years?
| $55.84 |
| $45.75 |
| $60.47 |
| $40.09 |
| $50.14 |
3. At 10 percent interest, how long does it take to triple your money? 14.33 years 11.53 years 9.67 years 10.36 years 10.56 years 4. You have $500 today and want to triple your money in 6 years. What interest rate must you earn if the interest is compounded annually?
| 18.08 percent |
| 19.90 percent |
| 22.15 percent |
| 20.09 percent |
| 21.21 percent |
Future Value
The future value of an asset is the value of the asset at a specified point in the future. The present value of the asset is compounded using the interest rate (growth rate) that is provided. In a positive interest rate environment, the future value of an asset will be greater than the present value of the same asset.
The formula to calculate the future value is:
{eq}Future\ Value = Present\ Value \times (1 + i)^{t} {/eq}
where i is the the interest rate and t is the number of periods into the future being calculated.
Answer and Explanation: 1
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1. You are scheduled to receive $7,500 in two years. When you receive it, you will invest it at 4.5 percent per year. How much will your investment...
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How to Calculate Future Value: Formula & Example
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Chapter 5 / Lesson 16
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Understand the definition of future value and the future value formula. Explore some examples that show how to calculate the future value of an investment.
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