Question

The future value of $200,000 invested at a 7% annual rate, compounded quarterly for 3 years is _____. (Do not round your intermediate calculations. Round the final answer to the nearest two decimal places.) $246,287.86

Answer 1

FV = 246,287.86

Step-by-step explanation:

The Future value (FV) of an investment is the total amount (principal plus interest) that will accumulate in the future where interest is paid and compounded at a particular rate per period for a certain number of periods.

In a simple language, it is the worth, in the future, of an investment made today, where interest is paid periodically over the investment period. Of course, you should expect this value to be greater than the amount investment.

The Future Value (FV) of an investment is ascertained using the formula below:

FV = PV × (1+r/m)^(n×m)

FV - Future Value, r -interest rate per period, n- number of periods, PV -present value- amount invested., m- is the number of compounding period.

So, we can apply this to the formula:

The number of compounding period ( "m" ) in this question is four (4 ) because we have four quarters in a year

FV = 200000× (1+0.07/4)^(3×4)

= 200,000 × 1.2314393

FV = 246,287.86