Question

An art collector has the opportunity to invest in bank certificates of deposit which pay 8% per year. What is the future value of $150,000 if the collector elects to purchase a bank certificate of deposit for 10 years?

Answer 1

To calculate the future value of the investment, we can use the compound interest formula:

Future Value = Present Value * (1 + interest rate)^time

Given:

Present Value (initial investment) = $150,000

Interest rate = 8% or 0.08

Time = 10 years

Plugging in the values into the formula:

Future Value = $150,000 * (1 + 0.08)^10

Calculating:

Future Value = $150,000 * (1.08)^10

Future Value ≈ $322,153.62

Therefore, the future value of $150,000 after 10 years with an interest rate of 8% per year would be approximately $322,153.62.

Step-by-step explanation: