Question

What is the future value?

Juan Garza invested $105,000 4 years ago at 16 percent, compounded quarterly. How much has he accumulated? Use Appendix A for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

Answer 1

Future value using formula:

Rate = 0.16 / 4 = 0.04 ( since it is compounded quarterly, we divide by 4)

n = 4 * 4 = 16 ( since it is compounded quarterly, we multiply by 4)

FV = PV ( 1 + r)ⁿ

FV = 105,000 ( 1 + 0.04)¹⁶

FV = 105,000 ( 1.872981 )

FV = $196,663

Future value using financial calculator:

First set the calculator to 4 compounding periods... to do that click 2ND I/Y = 4

Keys to use in a financial calculator: 2ND I/Y = 4, PV = -105,000, I/Y = 16, N = 16, CPT FV)

You get $196,663.03.