Future value of aninvestment Using the future valuetables solve the following: 1

Question

   Future value of aninvestment      Using the future valuetables solve the following:

1.       What is the future valueon December 31, 2014 of a deposit of $35,000 made on December 31,2010, assuming interest of 10% compound annually?

2.       What is the future valueon December 31, 2014 of a deposit of $10,000 made on December 31,2010, assuming interest of 16% compounded quarterly?

3.       What is the future valueon December 31, 2014 of a deposit of $25,000 made on December 31,2010, assuming interest of 12% compound semiannually?

Explanation / Answer

Answer:

Problem no. 1:

Present value (PV) = $35,000

Time (t) = 4 years (from Dec 31, 2010 to Dec 31, 2014)

Interest rate (r) = 10% or 0.1

Future value (FV) =?

We know that,

FV = PV * (1+r) t

FV = $35,000 * (1+0.1) 4

FV = $35,000 * (1.1) 4

FV = $35,000 * 1.4641

FV = $51,243.5

Problem no. 2:

Present value (PV) = $10,000

Time (t) = 4 years (from Dec 31, 2010 to Dec 31, 2014)

Interest rate (r) = 16% or 0.16

Future value (FV) =?

We know that,

FV = PV * (1+r) t

FV = $10,000 * (1+0.16) 4

FV = $10,000 * (1.16) 4

FV = $10,000 * 1.81063936

FV = $18,106.3936 or $18,106.39

Problem no. 3:

Present value (PV) = $25,000

Time (t) = 4 years (from Dec 31, 2010 to Dec 31, 2014)

Interest rate (r) = 12% or 0.12

Future value (FV) =?

We know that,

FV = PV * (1+r) t

FV = $25,000 * (1+0.12) 4

FV = $25,000 * (1.12) 4

FV = $25,000 * 1.57351936

FV = $39,337.984 or $39,337.98

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