Problem 9-1 Future value [LO2] You invest $3,000 for three years at 12 percent.

Question

Problem 9-1 Future value [LO2] You invest $3,000 for three years at 12 percent. a. What is the value of your investment after one year? Multiply $3,000x1.12 b.What is the value of your investment after two years? Multiply your answer to part a by 1.12. (Round your answer to 2 decimal places.) C. What is the value of your investment after three years? Multiply your answer to part b by 1.12. This gives your final answer. (Round your answer to 2 decimal places.) d. Confirm that your final answer is correct by going to Appendix A (future value of $1), and looking up the future value for n 3, and i 12 percent. Multiply this tabular value by $3,000 and compare your answer to the answer in part c. There may be a slight difference dueto rounding. (Enter the answer computed using the Appendix table factor.) Input variables: $3,000 Amount Number of years Interest rate d. FV factor from table 3 year 0.12 1.12 1.405 Solution and Explanation: Value in one year b. Value in two years C. Value in three years Value in three years

Explanation / Answer

Input variables Year 1 Year 2 Year 3 Year 4 Amount $ 3,000 Number of years 3 Interest rate 12% FV factor from table 1.12 1.2544 1.4049 1.5735 Value in year 3,360.00 3,763.20 4,214.70 4,720.50

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