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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Use Future Value and Present Value Tables to Apply Compound Interest to Accounting Transactions

Cathy Lumbattis inherited $140,000 from an aunt.

Required:

If Cathy decides not to spend her inheritance but to leave the money in her savings account until she retires in 15 years, how much money will she have, assuming an annual interest rate of 8%, compounded semiannually? (Note: Round answers to two decimal places.)

To determine

Concept introduction:

Time value of money:

Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.

To calculate:

The future value of the money.

Explanation

The future value of the money is calculated as follows:

Present value (A) $ 140,000
Annual return % 8%
Number of Y...

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