Chapter 5, Problem 1P

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Chapter
Section

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

FUTURE VALUE If you deposit $2,000 in a bank account that pays 6% 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. Introduction: The future value is the investment value that 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 Given, The present value is$2,000.

The interest rate is 6% or 0.06 annually.

The time period is 5 years.

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 \$2,000 for PV, 0.06 for I, and 5 for N in the above formula

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