Question

Evans invested $50,000 today in a mutual fund earning 5% interest, compounded annually.

• Round your answer to the nearest whole number (for example, enter 51 for 50.5555).
• Do not use negative signs with any of your answers.

a.	What is the value of the mutual fund in 5 years?	Answer
b.	What is the value of the mutual fund in 20 years?	Answer

Answer 1

a. value of the mutual fund in 5 years = $63,814

b. value of the mutual fund in 20 years = $132,650 or $132,665 (depending on the approach you follow)

Workings

In both these cases we need to find out the future value. This can be calcuated simply by multiplying the amount invested with Future Value factor for the corresponding year.

a) 50000*(FVF 5%, 5 years) = 50000*1.27628 = $63,814

b) 50000*(FVF 5%, 20 years) = 50000*2.65300 = $132,650

Alternately, you can also use a simple formula

Future Value = Present Value * ((1+Interest Rate)^No. of years)

a) 50000*(1.05)^5 = 50000*1.276282 = $63,814

b) 50000*(1.05)^20 = 50000*2.653298 = $132,665

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