Question

What is the future value (FV) after 4 years of the following investments: Payment $150 per year starting year 1. Interest Rate is 2% per quarter.

Answer 1

Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth in the future. If an investment earns simple interest, then the Future Value (FV) formula is:

FV = I x (1 + (R x T)

where:

• I = Investment Amount
• R = Interest Rate
• T = Number of year

With simple interest, it is assumed that the interest rate is earned only on the initial investment. With compounded interest, the rate is applied to each period's cumulative account balance. The formula for the Future Value (FV) of an investment earning compounding interest is:

FV = I x (1 + R) ^T

where:

• I = Investment Amount
• R = Interest Rate
• T = Number of years

given:-

I = $ 150

R = 2 % per quarter = 2x4= 8% yearly

T= 4

using the compound interest formula  

FV = I x (1 + R) ^T

FV = 150 x (1 + 8 ) ^ 4

FV = 204.07

Future Value is $ 204.07