   Chapter 9, Problem 2CQQ

Chapter
Section
Textbook Problem

If the interest rate is 10 percent, then the future value in 2 years of $100 today isa.$80.b. $83.c.$120.d. $121. To determine Calculation of future value of money. Explanation Option (d): The future value can be calculated as follows: Future value=Present value×(1+Interest)Time period121=100×(1+0.1)2121=100×(1.21)121=121 Future value is$121. Thus, the option “d” is correct.

Option (a):

The future value can be calculated as follows:

Future value=Present value×(1+Interest)Time period80=100×(1+0.1)280=100×(1.21)80<121

The calculated value is greater than the 80. Thus, the option “a” is incorrect

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