Question

Starting with $12,000, how much will you have in 12 years if you can earn 12 percent on your money? Round the answer to the nearest cent. Round FV-factor to three decimal places.

Calculate your answer based on the FV-factor.

$ ______

Calculate your answer based on the financial calculator.

$ ______

If you can earn only 8 percent? Round the answer to the nearest cent. Round FV-factor to three decimal places.

Calculate your answer based on the FV-factor.

$ _____

Calculate your answer based on the financial calculator.

$ _______

Answer 1

Interest rate = 12%

Future Value = Present Value * FVIF(12%, 12 years)

From the Future Value interest factor table we get FVIF(12%, 12 years) = 3.8960

Future Value = $12,000 * 3.8960

Future Value = $46,752

Future Value = Present Value * (1 + interest rate)^period

Future Value = $12,000 * (1 + 12%)¹²

Using Texas Instruments BA 2 Plus Calculator

SET N = 12, PV = -12000, I/Y = 12

CPT--> FV = 46.751.71

Future Value = $46,751.71

Interest rate = 8%

Future Value = Present Value * FVIF(8%, 12 years)

From the Future Value interest factor table we get FVIF(8%, 12 years) = 2.5182

Future Value = $12,000 * 2.5182

Future Value = $30,218.4

Future Value = Present Value * (1 + interest rate)^period

Future Value = $12,000 * (1 + 8%)¹²

Using Texas Instruments BA 2 Plus Calculator

SET N = 12, PV = -12000, I/Y = 8

CPT--> FV = 30,218.04

Future Value = $30,218.04

The Future Value interest factor table rounds off the interest factor to four decimal places which isn't the case with the financial calculator which gives a more accurate measure of the Future value.