Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Future value= (principal (1+interest)^number of periods. Future value at 8%- For 5 years= 100(1+.08)^ 5= 1469.32 For 10 years= 100(1+.08)^10= 2158.92 For 15 years =

Future value= (principal (1+interest)^number of periods.

Future value at 8%-

For 5 years= 100(1+.08)^ 5= 1469.32

For 10 years= 100(1+.08)^10= 2158.92

For 15 years = 100(1+.08)^15= 3172.169

Future value at 5%-

For 5 years= 100(1+.05)^ 5= 1276.28

For 10 years= 100(1+.05)^10= 1628.89

For 15 years= 100(1+.05)^ 15= 2078.92

it can be said that when there will be higher interest rate the future value will always be higher because higher interest rate will be leading to higher amount of compounding so 8% of compounding will produce higher rate of return than 5% of compounding.

it can also be said that there will be higher time duration for the future value then there will be high amount of compounding as well due to higher time and it can be seen that when there are increasing the time it is leading to increase in the future value as well.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jeff Madura

6th Edition

0134082915, 9780134082912

More Books

Students also viewed these Finance questions