What is the future value in five years of $1,000 invested in an account with a s

Question

What is the future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded annually? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded semiannually? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded monthly? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded continuously? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded annually? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

The formula to calculate FV of an amount: FV = PV * (1 + I/Y)N

PV = The PV of the investment

I/Y = Interest rate per period

N = Number of compounding periods.

1) The future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded annually:

FV = $1,000 * (1.10)5

FV = $1,610.51

2) The future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded semi-annually:

Here, N = 5 * 2 = 10

I/Y = 10% / 2 = 5%

FV = $1,000 * (1.05)10

FV = $1,628.89

3) The future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded monthly:

Here, N = 5 * 12 = 60

I/Y = 10% / 12 = 0.8333%

FV = $1,000 * (1.008333)60

FV = $1,645.31

4) The future value in five years of $1,000 invested in an account with a stated annual interest rate of 10 percent, compounded continuously:

Here, N = 5

I/Y = er

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