Question

•          Please place the correct numbers in XXX area, and #VALUE area

Future Value
	A. Of a single amount
Q 6	How much will $5,000 invested at 5% simple interest be worth
	In 3 years if it is compounded annually and quarterly?
	(Hint: Remember that the interest rate for quarterly compounding is 1/4 the annual rate)
				Compound Annually	Compound Quarterly
	Present Value			xxx	xx
	Number of time periods			xxx	xx
	Interest rate per time period			xxx	xx
	Future Value			#VALUE!	#VALUE!
Q 6	How much will $5,000 invested at 7% simple interest be worth
	In 3 years if it is compounded annually and quarterly?
				Compound Annually	Compound Quarterly
	Present Value			xxx	xx
	Number of time periods			xxx	xx
	Interest rate per time period			xxx	xx
	Future Value			#VALUE!	#VALUE!

Answer 1

Answer

6.

	Compound Annually	Compound Quarterly
Present Value	5,000	5,000
No. of Time Periods	3	12(3 Years * 4 quarter per year)
Interest rate per time period	5%	1.25%(5% / 4 Quarters)
Future Value	$5,788.125	$5,803.773

Future Value = Present Value * (1 + r)ⁿ

R = Rate of Interest

N = No. of Periods

Future Value (Annually) = $5,000 * (1 + 0.05)³

Future Value (Annually) = $5,788.125

Future Value (Quarterly) = $5,000 * (1 + 0.0125)¹²

Future Value (Quarterly) = $5,803.773

7.

	Compound Annually	Compound Quarterly
Present Value	5,000	5,000
No. of Time Periods	3	12(3 Years * 4 quarter per year)
Interest rate per time period	7%	1.75%(7% / 4 Quarters)
Future Value	$6,050	$6,050

Future Value = Present Value + (Present Value * R * N)

R = Rate of Interest

N = No. of Periods

Future Value (Annually) = $5,000 * ($5,000 * 0.07 * 3)

Future Value (Annually) = $6,050

Future Value (Quarterly) = $5,000 * ($5,000 * 0.0175 * 12)

Future Value (Quarterly) = $6,050