Compute the future value of $2000 compounded forward for 7 years at a rate of 16...

Compute the future value of $2000 compounded forward for 7 years at a rate of 16 percent compounded annually, and then at 16 percent compounded quarterly.

Expert Solution

	Future value - Annual compounding	PV×(1+r)^n

	Here,

A	Interest rate per annum	16.0%
B	Number of years	7
C	Number of compoundings per per annum	1
A÷C	Interest rate per period ( r)	16.0%
B×C	Number of periods (n)	7
	Present value (PV)	$ 2,000

	Future value - Annual compounding	$ 5,652.44
		2000×(1+16%)^7

	Future value - Quarterly compounding	PV×(1+r)^n

	Here,

A	Interest rate per annum	16.0%
B	Number of years	7
C	Number of compoundings per per annum	4
A÷C	Interest rate per period ( r)	4.0%
B×C	Number of periods (n)	28
	Present value (PV)	$ 2,000

	Future value - Quarterly compounding	$ 5,997.41
		2000×(1+4%)^28

jeff jeffy answered 2 years ago

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