Question

If you invest $9,400 per period for the following number of periods, how much would you have in each of the following instances? Use Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. In 12 years at 9 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)In 25 years at 9 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Answer 1

a)

FV computation using FV Factor:

FV = C x FVIFA (i, n)

      = $ 9,400 x FVIFA (9 %, 12)

      = $ 9,400 x 20.141 = $ 189,325.40

FV computation using formula method:

FV = C x [(1+i) ⁿ -1/i]

      = $ 9,400 x [(1+0.09)¹² -1/0.09]

   = $ 9,400 x [(1.09)¹² -1/0.09]

   = $ 9,400 x [(2.8126647817829-1)/0.09]

   = $ 9,400 x (1.8126647817829/0.09)

   = $ 9,400 x 20.1407197975877

   = $ 189,322.766097325 or $ 189,322.77

FV computation using Financial calculator:

2^ND P/Y 1 ENTER ↓

       C/Y 1 ENTER

2^ND QUIT

12 x 1 N

9 I/Y

0 PV

9400 +/- PMT

CPT FV = 189,322.77

Future value of investment is 189,322.77

b)

FV computation using FV Factor:

FV = C x FVIFA (i, n)

      = $ 9,400 x FVIFA (9 %, 25)

      = $ 9,400 x 84.701 = $ 796,189.40

FV computation using formula method:

FV = C x [(1+i) ⁿ -1/i]

      = $ 9,400 x [(1+0.09)²⁵ -1/0.09]

   = $ 9,400 x [(1.09)²⁵ -1/0.09]

   = $ 9,400 x [(8.62308066040319-1)/0.09]

   = $ 9,400 x (7.62308066040319/0.09)

   = $ 9,400 x 84.7008962267022

   = $ 796,188.424531 or $ 796,188.42

FV computation using Financial calculator:

2^ND P/Y 1 ENTER ↓

       C/Y 1 ENTER

2^ND QUIT

25 x 1 N

9 I/Y

0 PV

9400 +/- PMT

CPT FV = 796,188.42

Future value of investment is $ 796,188.42