Chapter 3, Problem 1ST

To determine

Calculate the future value.

Explanation of Solution

Time period is denoted by n and the interest rate or MARR is denoted by i. Future value (FV) can be calculated as follows.

$\begin{array}{c}\text{FV}=\text{Annual value}\left(\frac{\frac{\text{i}}{12}}{{\left(1+\frac{\text{i}}{12}\right)}^{\text{n}\times \text{12}}-1}\right)\\ =\text{1,000}\left(\frac{\frac{\text{0}\text{.06}}{12}}{{\left(1+\frac{\text{0}\text{.06}}{12}\right)}^{\text{10}\times \text{12}}-1}\right)\\ =163,879\end{array}$

Future value is $163,879. Thus, option ‘a’ is correct.