Question

On January 1 of the current year, Lean Co. made an investment of $10,000. The following is the present value of $1.00 discounted at a 10% interest rate:

Present value of $1.00

Periods Discounted at 10%

1 .909

2 .826

3 .751

What amount of cash will Lean accumulate in 2 years?

A. $27,002

B. $12,107

C. $12,000

D. $16,250

Answer 1

Lean Co. will accumulate $12,100 in 2 years on a $10,000 investment with a 10% interest rate using the future value formula, which matches option B.

Step-by-step explanation:

To determine how much cash Lean Co. will accumulate in 2 years at a 10% interest rate on an investment of $10,000, we need to calculate the future value of the investment.


The future value (FV) can be calculated using the formula FV = PV x (1 + r)^n, where PV is the present value, r is the interest rate, and n is the number of periods. Using an interest rate of 10% and a duration of 2 periods (years), the future value becomes:

FV = $10,000 x (1 + 0.10)^2

FV = $10,000 x (1 + 0.10)^2

FV = $10,000 x (1.10)^2

FV = $10,000 x 1.21

FV = $12,100

Therefore, the amount of cash Lean Co. will accumulate in 2 years is $12,100, which corresponds to option B in the provided multiple choice answers.