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Who receives the higher F/P ratio?

Derek deposits $15,000 in the Main Street Bank and lets it accrue interest at 5%. 25 years later, Gale deposits $30,000 in th

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Answer #1

In case of Derek

Deposit value=PV=$15000

Rate of interest =i=5%

Number of years=n=25+25=50

FV of deposit=PV*(1+i)n=15000*(1+5%)^50=$172011.00

F/P ratio=FV/PV=172011.00/15000=11.4674

In case of Gale

Deposit value=PV=$30000

Rate of interest =i=5%

Number of years=n=25

FV of deposit=PV*(1+i)n=30000*(1+5%)^25=$101590.6

F/P ratio=FV/PV=101590.6/30000=3.3864

Derek gets a higher F/P Ratio.

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