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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Future Value and Compound Interest Using the nature value tablet, solve the following.

Required:

  1. 1. What is the value on January 1,2026, of $40,000 deposited on January 1,2019, which accumulates intercast at 12% compounded annually?
  2. 2. What is the value on January 1, 2025, of $10,000 deposited on Ju1y 1, 2019, which Accumulates interest at 16% compounded quarterly?
  3. 3. What is the compound interest on an investment of $6,000 left on deposit for 5 years at 10% compounded annually?

1.

To determine

Determine the future value on January 1, 2026, for the amount of $40,000 deposited on January 1, 2019 at an annual interest rate of 12%, using compound interest.

Explanation

Future Value of a single sum: The future value is value of single present amount (single sum) compounded at an interest rate until a particular future date.

PV - Deposit of $40,000 is made on January 1, 2019

i - Interest is compounded annually at 12%

n - Number of years from January 1, 2019 to January 1, 2026 is 7 years.

Determine the future value on January 1, 2026.

FV=PV×(fn=7,i=12%)=$40,000×2

2.

To determine

Determine the future value on January 1, 2025, for the amount of $10,000 deposited on July 1, 2019 at an annual interest rate of 16%, which is compounded quarterly.

3.

To determine

Determine the amount of compound interest earned on a five year period, for the investment of $6,000 at 10% interest compounded annually.

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