Question

A sculpture was purchased for $4,000. The value of the sculpture increases at a rate of 4% per year. How much will the sculpture be worth after 10 years?

Answer 1

$5921

Explanation:

The formula for the future value (FV) of an asset is the same as the formula for compound interest:

FV = PV(1 + r)ⁿ

where

PV = the present value

r = the interest rate

n = number of years

Data:

PV = $4000

r = 4 %

n = 10 yr

Calculations:

A = 4000(1+ 0.04)¹⁰

= 4000 × 1.04¹⁰

= 4000 × 1.4802

= $5921

The sculpture will be worth $5921 in ten years.