Question

A deposit of $440 earns interest rates of 8.4 percent in the first year and 10.4 percent in the second year. What would be the second year future value?

Answer 1

Future value = Present value × (1 + i) × (1 + j)

     i = First year interest rate

   j = Second year interest rate

Solution,

                                  Future value = Present value × (1 + i) × (1 + j)

                                   = 440 × (1 + 8.4%) × (1 + 10.4%)

                                    = $440 × 1.084 × 1.104

                                    = $526.5638

The Second year Future value would be $526.56