Question

If you invest $16,500 today, how much will you have in each of the following instances? Use Appendix A as an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. In 12 years at 11 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. In 15 years at 8 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

c. In 25 years at 6 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

d. In 20 years at 6 percent (compounded semiannually)? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Answer 1

The future value of an investment amount is calculated by using the following formula

Future Value = Amount Invested x (1 + r)ⁿ

Where, “r” is the Interest Rate and “n” is the number of years

(a)-In 12 years at 11 percent

Future Value = Amount Invested x (1 + r)ⁿ

= $16,500 x (1 + 0.11) ¹²

= $16,500 x 3.49845

= $57,724.43

(b)-In 15 years at 8 percent

Future Value = Amount Invested x (1 + r)ⁿ

= $16,500 x (1 + 0.08) ¹⁵

= $16,500 x 3.17216

= $52,340.79

(c)-In 25 years at 6 percent

Future Value = Amount Invested x (1 + r)ⁿ

= $16,500 x (1 + 0.06) ²⁵

= $16,500 x 4.29187

= $70,815.87

(d)-In 20 years at 6 percent (compounded semiannually)

Since the compounding is done semi-annually, the Interest rate will be 3% [6% / 2] and the number of years will be 40 years [20 years x 2].

Future Value = Amount Invested x (1 + r)ⁿ

= $16,500 x (1 + 0.03) ⁴⁰

= $16,500 x 3.26203

= $53,823.62