Question

3 year(s) ago, Mack invested 5,930 dollars. In 1 year(s) from today, he expects to have 8,000 dollars. If Mack expects to earn the same annual return after 1 year(s) from today as the annual rate implied from the past and expected values given in the problem, then how much does Mack expect to have in 6 years from today?  

Answer 1

3 years from today

Investment done by Mack=$ 5,930

1 year from today, Mack expects to get $ 8,000

No we have to calculate annual return from the above data given, and apply the same return percentage to caclulate sum Mack will receive in year 6 from today.

We Know:

FV=PVx(1+r)^n

FV=Future Value, PV=Present Value, r annula rate of interest, n =no of periods

8000=5930x(1+r)^4

1+r=(8000/5930)^(1/4)=1.077727

r=0.077727

r%=7.772715

Putting the same rate of interest to calculate FV at the end of year 6 from today:

FV=8000*(1+0.077727)^5=$11,631.46 , Hence MAck will have $11,631.46 after 6 years from today.

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