Question

What is the future value of $1 invested for 10 years if the 12 percent annual rate of interest is compounded quarterly? (A) $2.93 B $3.25 $3.26 $2.30

Answer 1

Future value of $1 invested for 10 years, with 12% interest compounded quarterly is $3.26

The answer is option C of the given set.

Details of calculation as below:

A B C D E 1 Future Value 2 3 Future value of an amount is calculated using the formula FV=P(1+r)^n 4 Where P= Principal (Presen Value), 5 n= number of compounding periods 6 r= Rate of interest per period in decimals 7 All amounts in $ 8 Given that 9 Present Value (P)= 1 No. of years (N)= 101 10 Rate of interest (% p.a)=R= 12 No. of times compounded a year (t) 11 12 Calculations: 13 Formula Cell reference Value 14 Interest rate per period in decimals (r )=R/(100*t) D10/(100*G10) 0.03 15 No. of periods (n)= N*t G9*G10 40 16 (1+r)= 1+G14 17 (1+r)^n= G164G15 3.262037792 18 Future value FV= P*(1+r)^n D9*G17 3.262037792 19 Rounded to $3.26 20 1.03