Without using a table or calculator, use the basic formula forfutur value along

Question

Without using a table or calculator, use the basic formula forfutur value along with the given interest rate, i,and thenumber of period, n, to calculate the future valueinterest factor in each of the cases shown in the table. Case      Interest rate,i                Number of periods, n A             12%                                     2 B              6                                         3 C               9                                         2 D              3                                         4 Without using a table or calculator, use the basic formula forfutur value along with the given interest rate, i,and thenumber of period, n, to calculate the future valueinterest factor in each of the cases shown in the table. Case      Interest rate,i                Number of periods, n A             12%                                     2 B              6                                         3 C               9                                         2 D              3                                         4 A             12%                                     2 B              6                                         3 C               9                                         2 D              3                                         4

Explanation / Answer

Future Value Interest Factor(FVIF) = (1+r)n Case Interest Rate, i Number of Periods,n Future Value Interest Factor(FVIF) A 12% 2 (1+0.12)2 = 1.2544 B 6% 3 (1+0.06)3 = 1.1910 C 9% 2 (1+0.09)2 = 1.1881 D 3% 4 (1+0.03)4 = 1.1255 Future Value of InterestFactor for Annuity (FVIFA) = [(1+r)n-1] /r Case Interest Rate, i Number of Periods, n Future Value Interest Factor (FVIFA) A 12% 2 [(1+0.12)2 - 1] /0.12 = 2.1200 B 6% 3 [(1+0.06)3 - 1] /0.06 = 3.1836 C 9% 2 [(1+0.09)2 - 1] /0.09 = 2.0900 D 3% 4 [(1+0.03)4 - 1] /0.03 = 4.1836 Future Value Interest Factor(FVIF) = (1+r)n Case Interest Rate, i Number of Periods,n Future Value Interest Factor(FVIF) A 12% 2 (1+0.12)2 = 1.2544 B 6% 3 (1+0.06)3 = 1.1910 C 9% 2 (1+0.09)2 = 1.1881 D 3% 4 (1+0.03)4 = 1.1255 Future Value of InterestFactor for Annuity (FVIFA) = [(1+r)n-1] /r Case Interest Rate, i Number of Periods, n Future Value Interest Factor (FVIFA) A 12% 2 [(1+0.12)2 - 1] /0.12 = 2.1200 B 6% 3 [(1+0.06)3 - 1] /0.06 = 3.1836 C 9% 2 [(1+0.09)2 - 1] /0.09 = 2.0900 D 3% 4 [(1+0.03)4 - 1] /0.03 = 4.1836

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