Question

What is the future value in seven years of $1,100 invested in an account with an APR of 8 percent, compounded annually? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

     

Future value

$

b.	What is the future value in seven years of $1,100 invested in an account with an APR of 8 percent, compounded semiannually? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Future value

$

c.	What is the future value in seven years of $1,100 invested in an account with an APR of 8 percent, compounded monthly? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Future value

$

d.	What is the future value in seven years of $1,100 invested in an account with an APR of 8 percent, compounded continuously? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Future value

$

Answer 1

A. Information provided:

Present value= $1,100

Time= 7 years

Interest rate= 8%

The future value is calculated by entering the below in a financial calculator:

PV= -1,100

N= 7

I/Y= 8

Press the CPT key and FV to compute the future value.

The value obtained is 1,885.2067.

Therefore, the future value is $1,885.21 when the interest is compounded annually.

B.Information provided:

Present value= $1,100

Time= 7 years*2= 14 semi-annual periods

Interest rate= 8%/2= 4% per semi-annual period

The future value is calculated by entering the below in a financial calculator:

PV= -1,100

N= 14

I/Y= 4

Press the CPT key and FV to compute the future value.

The value obtained is 1,904.8441.

Therefore, the future value is $1,904.84 when the interest is compounded semi-annually.

C. Information provided:

Present value= $1,100

Time= 7 years*12= 84 months

Interest rate= 8%/12= 0.6667% per month

The future value is calculated by entering the below in a financial calculator:

PV= -1,100

N= 84

I/Y= 0.6667

Press the CPT key and FV to compute the future value.

The value obtained is 1,922.1643.

Therefore, the future value is $1,922.16 when the interest is compounded monthly.

D. Information provided:

Present value= $1,100

Time= 7 years

Interest rate= 8%

The question is solved using the below formula:

A= P*e^r*t

where:

P= Principal

r= interest rate

t= time

A= $1,100*e^0.08*7

   = 1,100*1.7507

   = 1,925.7398     $1925.74.

In case of any query, kindly comment on the solution.