Question

What is the future value of a 10,000 CD that is placed with MU Credit Union for 5 years at a rate of 3.25% compounded annually? The value of this illustration is _____________.  

You are given $127,000 today, but can not withdraw the money for 5 years. With an average inflation of 2%, what is the future value of the $127,000. The value is __________.  

You are the new CEO of MO Healthcare and as a result you were given a $250,000 bonus that you can not withdraw for 7 years. If the current inflation rate is 2%, what is the current value of this bonus. The value of this illustration is _______.  

You just inherited $150,000 for your great aunt MIMI, but you can not touch the money for another 25 years. Based on an inflation rate of 4%, what is the current value of this inheritance?

Answer 1

Answer 1.

Amount Invested = 10,000
Period = 5 years
Interest Rate = 3.25%

Future Value = Amount Invested * (1 + Interest Rate)^Period
Future Value = 10,000 * (1 + 0.0325)^5
Future Value = 10,000 * 1.0325^5
Future Value = 11,734.11

Answer 2.

Amount Invested = $127,000
Period = 5 years
Interest Rate = 2%

Future Value = Amount Invested * (1 + Interest Rate)^Period
Future Value = $127,000 * (1 + 0.02)^5
Future Value = $127,000 * 1.02^5
Future Value = $140,218.26