Question

Problem 4-21 Future Value

a.	What is the future value in seven years of $1,500 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.)

b.	What is the future value in seven years of $1,500 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.)

c.	What is the future value in seven years of $1,500 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.)

d.	What is the future value in seven years of $1,500 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.)

Answer 1

FV = PV * (1 + r)^n

a.	What is the future value in seven years of $1,500 invested in an account with an APR of 8 percent, compounded annually?

FV = 1,500 * (1 + 0.08)^7

FV = $2,570.7364031693

FV = $2,570.74

b.	What is the future value in seven years of $1,500 invested in an account with an APR of 8 percent, compounded semiannually?

r = 8%/2 = 0.04

r = 7 * 2 = 14

FV = 1,500 * (1 + 0.04)^14

FV = 2,597.5146714042

FV = $2,597.51

c.	What is the future value in seven years of $1,500 invested in an account with an APR of 8 percent, compounded monthly?

n = 7 * 12 = 84

r = 8%/12 = 0.006666666667

FV = 1,500 * (1 + 0.006666666667)^84

FV = 2,621.1330772172

FV = $2,621.13

d.	What is the future value in seven years of $1,500 invested in an account with an APR of 8 percent, compounded continuously?

FV = PV * e^(rt)

FV = 1,500 * e^(0.08*7)

FV = 2,626.0087504442

FV = $2,626.01

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