Question
Consider the following scenarios: i - an investor deposited $1,000 ten years ago in an investment account and earned a compound annual interest of 5%
Consider the following scenarios:
i - an investor deposited $1,000 ten years ago in an investment account and earned a compound annual interest of 5% yielding a balance of $1,628.89 today.
ii - an investor will deposit $1,000 five years from now in an investment account which is expected to earn a compound interest of 5% and yield a balance of $1,628.89 over a ten year period. The money will be used for a gift to the investor's child that was born today and will be 15 years old when the ten-year investment period ends.
Under which of the above scenarios could the $1,628.89 amount be considered the future value of $1,000?
Group of answer choices
Under scenario (ii) only because that is the only scenario where the amount will be reached at a future date
Under neither scenario because in neither case the initial deposit is made today
Under both scenarios because $1,628.89 represents a future value after a ten year period.
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