Question

Future Value Given a 7.75 percent interest rate, compute the year 7 future value of deposits made in years 1, 2, 3, and 4 of $2,800, $3,000, $3,300, and $3,300.

Answer 1

Future Value is the value of an asset at a specified date. It measures nominal future sum of money that a given sum of money is worth at a specified time in future considering a certain rate of return. It is based on concept of time value of money.

Formula for computing Future Value is :-

where, C = Cash Flow

r = Rate of return

n = Number of periods

FV in year 7 of deposit made in year 1 =  

= $4,381.89

FV in year 7 of deposit made in year 2 =

= $4,357.2

FV in year 7 of deposit made in year 3 =

= $4,448.19

FV in year 7 of deposit made in year 4 =

= $4,128.25