Question

What is the total future value of the following cash flows:

a.) $10,000 invested today for 20 years at an annual rate of 4.7%

b.) $25,000 invested for 6 years at 6%

c.) $50,000 invested for 15 years at 2.8%

d.) Which of the above is the best investment? Why?

Answer 1

a.Present value= $10,000

Time= 20 years

Interest rate= 4.7%

The future value is calculated with a financial calculator

The below has to be entered in a financial calculator:

PV= -10,000; N= 20; I/Y= 4.7

Press CPT and FV to calculate the future value

The future value is $25,057.26.

b.Present value= $20,000

Time= 6 years

Interest rate= 6%

The future value is calculated with the help of a financial calculator

The below has to be entered in a financial calculator

PV= -20,000; N= 6; I/Y= 6

Press CPT and FV to calculate the future value

The future value is $28,370.38.

c.Present value= $50,000

Time= 15 years

Interest rate= 2.8%

The future value is calculated with a financial calculator

The below has to be entered in a financial calculator:

PV= -50,000; N= 15; I/Y= 2.8

Press CPT and FV to calculate the future value.

The future value is $75,660.07.