Question

You put $8000 today in a bank safe deposit box and leave it there. You earn nothing in your bank account as the money is sitting inside a safe deposit box. Assume inflation rate is 10% a year. How much will your $8,000 be worth at the end of 5 years?

		$5,366.21
		$4,723.92
		$12,884.08
		$11,454.12

Answer 1

Future Value:

Future Value is Value of current asset at future date grown at given int rate or growth rate.

FV = PV (1+r)^n
Where r is Int rate per period
n - No. of periods

Particulars	Amount
Future Value	$              8,000.00
Int Rate	10.0000%
Periods	5

Future Value = Present Value * ( 1 + r )^n
= $ 8000 ( 1 + 0.1) ^ 5
= $ 8000 ( 1.1 ^ 5)
= $ 8000 * 1.6105
= $ 12884.08
Option C is correct.