Question

What is the future value of $100 invested at 10% compounded annually for 3 years?

What is the future value of $100 invested at 10% compounded annually for 10 years?

What is the present value of an investment that will give you $100 after 10 years with a rate of 10% compounded annually?

You end up with $20,000 after investing for 20 years at 8% annually. What was the PV?

Maverick Jane places $800 in a savings account paying 6% interest compounded annually. How much money will be in the account at the end of five year?  

Answer 1

FV = PV(1+r)^n

PV = FV / ( 1+r)^n

Where r is Int Rate per anum

n is no. of Years

Part A:

= $ 100 ( 1 + 0.10 )^3

= $ 100 ( 1.10 )^3

= $ 100 * 1.331

= $ 133.10

Part B:

= $ 100 ( 1 + 0.10 )^10

= $ 100 ( 1.10 )^10

= $ 100 * 2.5937

= $ 259.37

Part C:

= $ 100 / ( 1 + 0.10)^10

= $ 100 / ( 1.10)^10

= $ 100 / 2.5937

= $ 38.55

Part D:

Assuming Payment is done at Year "0" and it is not an annuity

= $ 20000 / ( 1 + 0.08)^20

= $ 20000 / ( 1.08)^20

= $ 20000 / 4.6610

= $ 4290.96

If it is annuity Paymnet :

FV of Annuity = Cash Flow * [ [(1+r)^n ] - 1 ] /r

$ 20000 = CF * [ ( 1 +0.08)^20 - 1 ] / 0.08

$ 20000 = CF * [ ( 1.08)^20 - 1 ] / 0.08

$ 20000 = CF * [ 4.6610 - 1 ] / 0.08

$ 20000 = CF * [ 3.6610 ] / 0.08

CF = 20000 * 0.08 / 3.6610

= $ 437.04

Part E:

= $ 800 ( 1+0.06)^5

= $ 800 ( 1.06)^5

= $ 800 * 1.3382

= $ 1070.58