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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

FUTURE VALUE If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?

Summary Introduction

To determine: The balance available in the account after five years.

Future value: The future value means that value of the investment, which will be realized in the future. With the help of the calculation of future value, an analysis of the amount to be invested can be made. This is very useful for the financial users and investors.

Explanation

Solution:

Given,

The present value is $10,000.

The interest rate is 10% paid annually.

The time period is 5 years.

Calculation of the future value:

The formula to calculate the future value:

FV=PV(1+I)N

Where,

  • FV is the future value,
  • PV is the present value,
  • I is the interest rate and
  • N is the time period.

Substitute $10,000 for PV, 10% for I, and 5 for N in the above formula

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