Question

What is the future worth of each of the following investments?
a) $6,300 in 6 years at 15% compounded annually
b) $2,000 in 4 years at 4.25% compounded annually
c) $200 in 27 years at 6% compounded annually
d) $4,300 in 6 years at 7% compounded semiannually
e) $500 in 17 years at 9% compounded quarterly

Answer 1

The future worth is computed as shown below:

Future value = Present value x (1 + r)ⁿ

a. The amount is computed as follows:

= $ 6,300 x 1.15⁶

= $ 14,572.28

b. The amount is computed as follows:

= $ 2,000 x 1.0425⁴

= $ 2,362.30

c. The amount is computed as follows:

= $ 200 x 1.06²⁷

= $ 964.47

d. The amount is computed as follows:

= $ 4,300 x (1 + 0.07 / 2) ^{6 x 2} (r is divided by 2 and n is multiplied by 2, since the interest is compounded semi annually)

= $ 4,300 x 1.035¹²

= $ 6,497.60

e. The amount is computed as follows:

= $ 500 x (1 + 0.09 / 4)^{17 x 4} (r is divided by 4 and n is multiplied by 4, since the interest is compounded quarterly)

= $ 500 x 1.0225⁶⁸

= $ 2,270.26