Work through the following scenario to understand future value and the concept of compounding interest.

You have an eccentric aunt who has promised to deposit $7,000 in a savings account in your name. She has stated that you will not have access to the money for six years but that the money will be earning 7% interest. At the designated future date, the principal and interest will be yours to purchase a new car.

First gather the relevant data by completing the following table.

Present Value:
Period:
Rate of Interest:	%
Future Value Factor:

Next use the following table of future value factors or your financial calculator to calculate the future value of this money in six years.

Period	1%	2%	3%	4%	5%	6%	7%	8%
1	1.010	1.020	1.030	1.040	1.050	1.060	1.070	1.080
2	1.020	1.040	1.061	1.082	1.103	1.124	1.145	1.166
3	1.030	1.061	1.093	1.125	1.158	1.191	1.225	1.260
4	1.041	1.082	1.126	1.170	1.216	1.262	1.311	1.360
5	1.051	1.104	1.159	1.217	1.276	1.338	1.403	1.469
6	1.062	1.126	1.194	1.265	1.340	1.419	1.501	1.587
7	1.072	1.149	1.230	1.316	1.407	1.504	1.606	1.714

The account will have a balance of in six years (rounded to two decimal places).