In: Finance
At a certain interest rate compounded annually, P5,000 will amount to P10,795 in 10 years. What is the amount at the end of 15 years? Answer: P15,861.40
1) Calculation of interest rate
Future Value:
FV = PV (1+r)^n
Where
r is Int rate per period
n - No. of periods
Particulars | Amount |
Present Value | $ 5,000.00 |
Future Value | $ 10,795.00 |
Periods | 10 |
Future Value = Cash Flow * ( 1 + r )^n
$ 10795 = $ 5000 ( 1 + r ) ^ 10
( 1 + r ) ^ 10 = $10795 / $5000
( 1 + r ) ^ 10 = 2.159
( 1 + r ) = 2.159 ^ ( 1 / 10 )
( 1 + r ) = 1.08
r = 1.08 - 1
r = 0.08 i.e 8 %
2) amount at the end of 15 years
Amount after 10 years = $ 10795
balance period = 5 years
Particulars | Amount |
Present Value | $ 10,795.00 |
Int Rate | 8.0000% |
Periods | 5 |
Future Value = Present Value * ( 1 + r )^n
= $ 10795 ( 1 + 0.08) ^ 5
= $ 10795 ( 1.08 ^ 5)
= $ 10795 * 1.4693
= $ 15861.4
amount at the end of 15 years = $ 15861.4
Please comment if any further assistance is required.