Question

7. Multiple compounding periods: Find the future value of a five- vear $100,000 investment that pays 8.75 percent and that has the following compounding periods: (a) Quarterly. (b) Monthly. (c) Daily. (d) Continuous. 8. Growth rates: Joe Mauer, a catcher for the Minnesota Twins, is expected to hit 15 home runs in 2014. If his home-run-hitting ability is expected to grow by 12 percent every year for the following five years how many home runs is he expected to hit in 2019? 9. Present value: Roy Gross is considering an investment that pays 7.6 percent, compounded annually. How much will he have to invest today so that the investment will be worth $25,000 in six years?

Answer 1

Future value = Present value x (1+i=n)^nt Future value = FV = $100,000 X (1+8.75%/4)^(4*5) $154,154.24 Future value = FV = $100,000 X (1+8.75%/12)^(12*5) $154,637.37 Future value = FV = $100,000 X (1+8.75%/365)^(365*5) $154,874.91 Future value = FV = 100,000 x e-(0.0875x5) = $154,883.03