# 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.

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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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Chapter 5 / Lesson 16Understand 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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