Question

Problem 4-2

Calculating Future Values

a. Compute the future value of $2,000 compounded annually for 10 years at 8 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $

b. Compute the future value of $2,000 compounded annually for 10 years at 11 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $

c. Compute the future value of $2,000 compounded annually for 15 years at 8 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $

Answer 1

For calculating future values we have to apply this formula

FV=PV (1+R/100)n

where,

FV= future value

PV=present value

R = rate of return

N =no of years

(a)In above part pv=$2000 n=10 years r=8%

after applying above formula 2000(1+8/100)10 = $4317.85

(b) In above part PV= $2000 n=10 years R=11%

by applying above formula $2000(1+11/100)10=$5678.84

(c) In above part PV=2000 n=15 years R= 8%

by applying above formula 2000(1+8/100)15=$6344.34