5.1 What amount will the following investments accumulate? a. $30,000 invested f

Question

5.1 What amount will the following investments accumulate? a. $30,000 invested for 5 years at 5% compounded annually. b. $5,000 invested for 7 years at 4% compounded annually. c. $17,000 invested for 15 years at 6% compounded annually. d. $100,000 invested for 10 years at 4% compounded annually. 5.2 Calculate the future value of $30,000, given that it will be held in the bank for 5, 10 and 15 year periods at 4% annual interest rate. 5.3 At what annual interest would the following have to be invested at? a. $10,000 to grow to $20,000 in 7 years. b. $25,000 to grow to $8,000 in 5 years. c. $15,000 to grow to $30,000 in 20 years. 5.1 What amount will the following investments accumulate? a. $30,000 invested for 5 years at 5% compounded annually. b. $5,000 invested for 7 years at 4% compounded annually. c. $17,000 invested for 15 years at 6% compounded annually. d. $100,000 invested for 10 years at 4% compounded annually. 5.2 Calculate the future value of $30,000, given that it will be held in the bank for 5, 10 and 15 year periods at 4% annual interest rate. 5.3 At what annual interest would the following have to be invested at? a. $10,000 to grow to $20,000 in 7 years. b. $25,000 to grow to $8,000 in 5 years. c. $15,000 to grow to $30,000 in 20 years.

Explanation / Answer

Formula for future value = FV= PV (1+k)n

When PV = present value

K= interest rate

N= no of years

5.1.a.

FV=                30,000(1.05)5

=30,000*1.276

=$38,280

5.1.b.

FV=5000(1.04)7

=5000*1.316

=$6580

5.1.c.

FV=17000(1.06)15

=17000*2.397

=$40,749

5.1.d

FV=100,000(1.04)10

=100,000*1.480

=$148,000

5.2

FV=30,000(1.04)n

For n=5 years

FV =30,000(1.04)5

=30,000*1.217

=$36,510

For n=10 yrs,

FV=30,000(1.04)10

=30,000*1.480

=$44,400

For n=15 years

FV=30,000(1.04)15

=30,000*1.801

=$54,030

5.3

1. 20,000=10,000(1+k)7

(1+k)7 =2

K= 10.5 % approx ( from table of Future value interest factor)

2.

80,000=25000(1+k)5

(1+k)5=3.2

K= 4.5% approx ( from table of Future value interest factor)

3.

30,000=15000(1+k)20

(1+k)20=2

K=3.5% approx( from table of Future value interest factor)

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