Chapter 17, Problem 6BTN

To determine

Introduction:

Future Value

• Future value is the value of an investment made today calculated as on a future period, determined today at a predefined rate of interest.

• Future value analysis helps in evaluation of several alternatives and investment opportunities in the form of long term investment decisions in property, stocks and shares of other companies etc.

• Future value calculations also help in analyzing make or buy decisions, selection or rejection and comparison of investment alternatives.

• Formula for calculation of future value:

$\begin{array}{l}\text{FV=P*(1+r)^n}\\ \\ \text{Where,}\\ \\ \text{P=The investment made every year}\\ \\ \text{r = Rate of interest }\\ \\ \text{n = Duration of investment}\end{array}$

Investment strategy to accumulate $1,000,000 by age 65