The future value of $1,000 compounded annually for 8 years at 12% may be calculated with...
The future value of $1,000 compounded annually for 8 years at 12% may be calculated with the following formula:
FV = $1,000 * (1 + 12%)8
If the same $1,000 was compounded quarterly, what formula would you use to calculate the FV?
Multiple Choice
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FV = $1,000 * (1 + 3%)8
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FV = $1,000 * (1 + 12%)32
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FV = $1,000 * (1 + 3%)32
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FV = $1,000 * (1 + 12%)2
Homework Answers
3th option: $10000*(1+3%)32
For calculating quarterly : formula will change as follow:
FV=$1000*(1+12*/4) 8*4
Means interest will be divided by 4 and time will be multiplied by 4.
General Formula= FV= 1000* (1+12%/n) 8*n
where n=2 for half yearly n=4 for quarterly etc
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