Question

What is the future value of $850 received today if it is invested at 7.5%, compounded annually for 11 years?

Answer 1

Solution - Simple future value calculation

1st Method - FV = Amount invested ( 1 + rate of interest)^{no of terms}

= $850 (1.075)¹¹ = $ 1,883.3

2nd Method - Time consuming but understandable - By computing interest on opening balance of every year and add it to get revised opening of every year.  

Years	Opening ($)	Interest ($)	Closing ($)
	(1)	(2) = (1)*7.5%	(3) = (1) + (2)
1	850.0	63.8	913.8
2	913.8	68.5	982.3
3	982.3	73.7	1,056.0
4	1,056.0	79.2	1,135.1
5	1,135.1	85.1	1,220.3
6	1,220.3	91.5	1,311.8
7	1,311.8	98.4	1,410.2
8	1,410.2	105.8	1,516.0
9	1,516.0	113.7	1,629.7
10	1,629.7	122.2	1,751.9
11	1,751.9	131.4	1,883.3