Problem 5-33 Calculating Future Values [LO 4] You have an investment that will p

Question

Problem 5-33 Calculating Future Values [LO 4]

You have an investment that will pay you 1.13 percent per month.

Requirement 1:

How much will you have per dollar invested in one year? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Future value

$

Requirement 2:

How much will you have per dollar invested in two years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

  Future value

$

References

eBook & Resources

You have an investment that will pay you 1.13 percent per month.

Explanation / Answer

Future value of an amount can be computed as -

FV = Amount x (1 + r)n

where, r = periodic rate of interest, n = no. of time periods

1) r = 1.13% or 0.0113, n = 12 (months in one year)

FV = $1 x (1 + 0.0113)12 = $1.1443532 or $1.14

2) r = 0.0113, n = 24

FV = $1 x (1 + 0.0113)24 = $1.30954424 or $1.31

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