Question

Please make sure you show what you input (i.e., PV=-1000, I/Y=10%, N=30 solved for FV=17449.40). Make sure you round to 2 decimal points in your answers. 1. I want to be able to buy a car with cash in 4 years. I have $10,000 that I can invest today. I can get a bond earning 3%. How much will I have for the purchase?

Answer 1

In this question we need to find the future value of $10000, after 4 years, and the deposit is earning interest rate of 3%.

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Future value is calculated by compounding the Present cash flow

The formula is,

FV = Present value *(1 + r) ^n

= 10000*(1 + 0.03) ^4

= 10000*(1.03) ^4

= 10000*(1.12550881)

= 11255.0881

So FV value of 10000 received after 4 years is 11255.0881

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Hope that helps.

Feel free to comment if you need further assistance J